22 Aug SBA Loans for Attorneys: Tips for Growing Your Practice
Offices of Lawyers (NAICS Code: 541110) ranked #11 in our latest research on the top 20 performing industries for SBA financing over the last decade. During this period, attorneys received more than 5,800 SBA 7(a) loans totaling roughly $1.15 billion. Attorneys find the 7(a) Program to be one of the most attractive options for financing as a result of the flexibility surrounding the permissible uses of proceeds, such as continuing legal education, refinancing existing debt and working capital to cover case expenses.
Competition for jobs within the industry is expected to increase according to the U.S. Bureau of Labor Statistics as more students graduate from law school each year than there are positions available. Rather than pursuing alternative careers, many graduates may look to start their own practice which will require start-up capital that can be obtained via SBA loans.
Common Ways Attorneys Use SBA Loans
Regardless of experience, the challenges of running your own legal practice can be substantial and it’s critical to understand the anticipated expenses of growing your business. Below are a few examples of ways SBA loan funds can be used to further your practice.
- Maintaining Reputation – Firms are expected to have tastefully decorated offices, knowledgeable and licensed staff members and maintain various association memberships to give the impression of credibility and professionalism to their clients, all of which can be costly.
- Marketing Campaigns – Word of mouth is excellent advertising for a law firm, but more and more firms are looking for better ways to land additional clients and attract the best recruits. Digital advertising, T.V. and radio are some of the most common forms of marketing campaigns for attorneys.
- Specific Cases – It is becoming more common for established attorneys to seek financing for complex litigation work tied to an upcoming case they expect to win. These loans can typically be secured by a future verdict or settlement.
- Business Acquisitions – Changing demographics and the retirement of professional service firm owners creates an opportunity for business acquisition and expansion.
Understanding which of these needs are required for your practice can help increase the likelihood of being approved for an SBA 7(a) loan.
Key Statistics & Trends
Since 2010, lawyers have tapped into more than $1 billion in financing through the program. Below are key takeaways and observations surrounding this activity.
- Volume Trends – While the overall dollar volume for attorneys has grown by nearly 75% since 2010 ($77MM in FY2010 to $134MM in FY2018), the number of firms utilizing the program has slightly declined in recent years.
- Loan Size – The average loan size for law firms is much lower than national average. Last year, the average loan size for attorneys was $219,471 versus the national average of $424,002.
- Top States – Colorado ranked #5 for number of loans approved to attorney’s through the program since 2010. However, the state ranked #15 nationally based on total number of loans during this same period. As noted in the Huffington Post, the high salaries and low unemployment rate makes the state a great option for attorneys.
Utilizing the SBA 7(a) Loan Program is one of the most popular ways for law firms to access capital. Maintaining a high level of credibility and professionalism, running marketing campaigns and being able to accept large scale litigation work will require many legal practices seek financing. Whether you’re starting your own practice or trying to buy an existing practice, the SBA 7(a) Loan Program is one of the best financing options on the market. To learn more, call Meridian Loan Partners at (866) 823-5550 or visit SBALoanMarketplace.com to see if SBA financing is right for your practice.
In our next article, we will discuss the SBA lending market for accountants and some of the best ways these professionals tend to leverage the program.
About Meridian Loan Partners, LLC
Meridian thoughtfully combines technology with efficient processes and experienced staff to provide lenders with a fully-outsourced SBA 7(a) loan origination and processing platform for loans of less than $350,000 (“small loans”). By expanding the universe of lenders focused on “small loans”, borrowers benefit through reduced costs and increased access to capital while lenders benefit with community reinvestment. Since 2010, the Meridian management team has helped close more than $1.0 billion in 7(a) loans in all 50 states for hundreds of banks and credit unions.