3 Types of Law Firm Loans to Help Grow Your Practice
September 27, 2024
Starting your own law firm or expanding your practice can be an exciting endeavor as you work to gain clients and build your caseload. However, pursuing growth will require funding to cover the expenses of running a firm, including rent, payroll, office expenses, and advertising.
When you’re ready to hang your own shingle, law firm financing options are available to help cover your operational needs while you grow your practice.
Learn about three types of law firm loans that may help you expand and win more prominent clients. Also, discover why Texas Gulf Bank is the ideal lending partner for law practices in the Southeast Texas Gulf Coast region.
Why Is Law Firm Funding Necessary?
Although law firms typically generate substantial income over time, your new or growing law office may need immediate funding to cover working capital needs and office expenses until you can begin billing clients for work. Small business loans enable your law office to focus on growing your client roster and work on litigation while meeting financial requirements.
In addition, reliable funding solutions may allow your law firm to avoid using much of your cash reserves or high-interest credit cards to cover expenses. With the financial support of business loans, your business could be better positioned to have stable cash flow and pursue long-term growth.
Three Effective Law Firm Loans for Your Practice
If your law firm needs strategic funding, Texas Gulf Bank can help. We offer multiple loan options that offer financing flexibility, favorable loan terms, and competitive interest rates in the market.
1. SBA Financing
The Small Business Administration (SBA) is a federal agency dedicated to supporting small business owners by providing access to financial resources. The SBA guarantees a portion of the loan, allowing banks such as Texas Gulf Bank to help provide new and growing businesses access to funding they might not otherwise qualify for.
SBA loans typically offer flexibility in how funds can be used. The two primary SBA loans that may benefit your law firm are the SBA 7(a) loan and the SBA 504 loan.
SBA 7(a) Loan
The SBA 7(a) loan is popular with law firms because it can be used to cover a broad range of expenses and business needs. SBA 7(a) funds can be used for:
- Short and long-term capital
- Employee payroll
- Business taxes
- Utilities and building maintenance costs
- Office equipment
- Continuing education costs
- Legal software and licensing costs
- Advertising and marketing costs
- Restructure existing business debts
SBA 504 Loan
If your law firm has outgrown your current property or you want to build your own office from the ground up, an SBA 504 loan may be a better fit. This SBA loan option is intended for businesses that need to make major fixed-asset purchases.
SBA 504 loans can cover costs such as:
- Commercial land purchase
- Owner-occupied building
- Construction costs
- Building renovations or upgrades
- Land, road, and utility improvements
- Building or business acquisitions
Pursuing an SBA loan could be a smart option for your law firm. At Texas Gulf Bank, we understand the complexities of the SBA loan process and have SBA Loan Specialists available to help guide you through the application process.
2. Working Capital Line of Credit
If your law firm needs a short-term loan option to cover business expenses, a working capital line of credit may be an ideal financing option. Similar to a credit card, a business line of credit allows you to borrow funds up to a fixed limit on an as-needed basis to cover operational expenses.
With a working capital line of credit, your law firm may realize financial flexibility since funds can be used for many business needs. Your business will only pay interest on any outstanding loan amount, and you can borrow and repay up to the maximum approved amount until the maturity date through a revolving line of credit.
3. Owner Occupied Commercial Real Estate Loan
If your established law firm has outgrown your existing office space, you may consider pursuing an owner occupied commercial real estate loan. With this type of business loan, your law firm may have the financial resources necessary to buy or build a new commercial property while also leasing out any unused space to generate additional revenue streams.
With an owner occupied commercial real estate loan, your business is only required to occupy at least 51% of the property. Your law firm could then lease any remaining space to stable tenants such as accounting firms, medical offices, or city or municipal agencies. This loan option gives your business space for growth, regular revenue, and property ownership that has the potential to increase in value over time.
Commercial real estate loans for owner occupied properties are typically 12-18 months and intended to cover the building process. Depending on the type of loan, some loans automatically convert to a mini-permanent mortgage* once construction is complete.
*NOTE: Some creditors may offer one-time-close construction loans that include a permanent mortgage, but Texas Gulf Bank’s one-time close construction loans only include a mini-permanent mortgage.
Whether you need financing to start your own law practice, expand your current law office, or acquire a competing law firm, Texas Gulf Bank can help. We have extensive experience supporting local law firms with strategic loan options, including individual law offices, small to medium firms, and large law practices.
Texas Gulf Bank: Grow Your Practice with Our Loan Solutions
At Texas Gulf Bank, we have over 110 years of experience helping companies throughout the region meet their financial goals and grow their business, including law firms.
We offer a range of financing options that can be tailored specifically to meet your firm’s current business needs and long-term growth plans. Plus, our lenders are based throughout the Southeast Texas Gulf Coast market to provide you with tailored support.
Contact our office today to speak with one of our local lenders. We’ll be ready to discuss which law firm loans can support your new or growing law practice.
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All loans subject to credit approval.