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Law Firm Financing
Law firms are eligible for SBA lending and bankable when they bill hourly, and contingency practices have a separate set of lenders built for the docket. Debt is the outside capital the ethics rules allow, and these guides cover every form of it.
Why lenders say no to law firms & attorneys businesses
- Rules of professional conduct modeled on ABA Model Rule 5.4 bar non-lawyer ownership and fee sharing, so a law firm cannot raise equity to strengthen its balance sheet.
- A firm's real asset is unbilled work and, for contingency practices, a docket that pays nothing until cases resolve, which conventional bank underwriting gives little or no credit.
- Contingency revenue arrives in settlements rather than monthly deposits, so twelve months of bank statements read as unstable to a general commercial lender.
- Client funds held in trust inflate deposits without adding revenue and can never be pledged, and trust accounting errors are treated by lenders as disqualifying.
- Revenue follows the lawyers who originate it, so lenders price the risk that a key partner leaves, is disabled or dies before the loan is repaid.
What actually gets funded
- Bank lines and term loans for hourly firms: Firms with billed receivables and steady collections borrow much like any professional services business, with a borrowing base on eligible invoices or a cash flow line sized from trailing collected fees.
- Case-cost lines: Specialty legal lenders fund experts, records, depositions and filing fees on contingency matters as they arise, repaid at resolution, structured as a loan to the firm with interest rather than a share of fees.
- Portfolio loans and post-settlement advances: Litigation finance companies lend against expected fees across a verified docket, and legal funding companies advance against earned fees in settled cases that are waiting on payment, usually within days.
- SBA 7(a) for practice purchases and partner buyouts: Law firms are not excluded by 13 CFR 120.110, so SBA lenders finance a change of ownership with a buyer equity injection and a seller note on standby, priced on client retention.
- Equipment and office real estate: Equipment lenders finance technology and furniture, with Section 179 expensing available subject to limits and the owner's circumstances, and SBA 504 or conventional mortgages finance an owner-occupied office.
- Unsecured products on owner credit: For smaller amounts and younger firms, unsecured term loans and lines priced on the partners' personal credit fund a buildout or a hire quickly, at a higher cost and a shorter term.
Law Firms & Attorneys funding guides
- Financing a Law Firm Acquisition, Merger or Partner Buyout — Law firm acquisition financing combines SBA 7(a) or bank term debt with a seller note and often an earn-out, priced on whether clients follow the practice. How a firm is valued, structured and financed.
- Contingency Fee Law Firm Funding: Case-Cost Lines, Portfolio Loans and Fee Advances — Contingency fee law firm funding comes in three structures tied to the docket: case-cost lines, portfolio loans and post-settlement fee advances. What each costs, how ethics rules shape it, and the tax treatment of case costs.
- Law Firm Lines of Credit: Case Costs, Payroll and Growth — A law firm line of credit is sized from trailing collected fees, eligible receivables and, for contingency firms, case inventory. What it should and should not fund, the covenants, and how bank and specialty lines differ.
- Why Banks Decline Law Firms (Especially Contingency Practices), and What Works — Banks decline law firms because the collateral is thin, contingency revenue is lumpy, work in process cannot be pledged the usual way and ethics rules block equity. Specialty lenders were built for exactly that file.
- Law Firm Financing: Every Option for Growing a Practice — Law firm financing spans bank and specialty lines, term loans, case-cost lines, post-settlement fee advances, portfolio loans, SBA 7(a) and real estate debt. Which fits your practice, and how placement works.
How MercFinancial places law firms & attorneys requests
MercFinancial is a commercial funding brokerage in Houston, not a lender, and it treats a law firm request as a reading exercise before it is a placement. A funding specialist works out how the firm bills, what it collects, what the docket looks like and what the money is for, because those answers decide which funding sources can look at the file at all. From more than 160 wholesale and institutional sources, the specialist identifies the ones whose credit policy allows law firms and the structure in question, and one file goes to all of them.
The offers come back and are compared on amount, cost, term, reporting, cleanup and guaranty, and the firm chooses with the trade-offs in view. Every approval, amount, rate and term is the funding source's decision, and when nothing fits, the firm is told so plainly rather than sent through another round. The fastest start is a pre-qualification with Stephanie, which takes two to three minutes with a soft credit pull, or a free 30-minute call booked through the contact page.
Frequently asked questions
Can a law firm get a business loan?
Yes. Hourly and flat-fee firms with billed receivables qualify for bank lines, term loans and receivables financing much like other professional services firms. Contingency firms borrow from specialty legal lenders through case-cost lines, portfolio loans and post-settlement advances tied to the docket. Younger firms often start with unsecured products priced on the partners' credit. Availability depends on each funding source's policy.
Can a law firm get an SBA loan?
Yes. Law firms are not among the ineligible businesses listed in 13 CFR 120.110, so a for-profit firm that meets the SBA's size, equity and repayment requirements can apply for a 7(a) loan for a practice purchase, a partner buyout, working capital or a buildout, and a 504 loan for an owner-occupied office. Each SBA lender applies its own credit policy on top.
How do contingency fee law firms get financing?
Through lenders that underwrite the docket rather than monthly deposits. A case-cost line funds experts, records and filing fees as they arise and is repaid at resolution. A portfolio loan advances working capital against expected fees across the caseload. A post-settlement advance bridges an earned fee that is waiting on payment. All are loans to the firm with interest, structured to respect the rules against fee sharing.
Why do banks turn down law firms?
Because the file fails a bank's template: little hard collateral, revenue that arrives in lumps, work in process the bank gives no credit for, and ethics rules that keep equity off the balance sheet. Established hourly firms with steady collections do get bank lines. Most declines are about the bank's policy rather than the firm's credit, and the answer is a lender built for the industry.
What does a law firm need to apply for financing?
Three years of tax returns, year-to-date financials, collected fees by month separate from billings, an aging of receivables, operating account statements kept apart from trust activity, and for contingency firms a case inventory with stages, costs advanced, expected fees and dates, plus a history of resolving cases on forecast. Add partner resumes, the firm agreement and malpractice coverage, and expect a personal guaranty.
Financing for this industry
- Business Funding — Eight programs, one file, 160+ lenders.
- Unsecured Business Loans — Term loans and lines without specific collateral, for businesses with steady deposits.
- Real Estate Funding — DSCR, fix and flip, construction, bridge and portfolio loans for investors.
Related industries
MercFinancial is a commercial funding brokerage, not a lender. Approval, loan amount, rate, term and funding are decided by the funding source on the strength of the file; nothing on this page is an offer or a commitment to lend.