February 28, 2023 By Suzanne Robertson

If you’re running a busy boutique law firm, it’s important to secure the right financing options as you expand your practice. Taking out a business loan can be a great way to fund growth, but it is important to choose the right loan for your situation.

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The Small Business Administration (SBA) offers several types of loans that can be used by attorneys to finance business expansion. These loans offer competitive interest rates and are backed by the government, typically making them an attractive option for many legal professionals. Here’s more information about how an SBA loan may help attorneys interested in expanding their law practice.

What is an SBA loan?

An SBA 7(a) loan is a small-business loan that can help cover working capital needs, expansions, real estate purchases, hiring, and more. This type of financing is issued by a private lender, usually a bank, but backed by the federal government. When a loan is backed by the government, lenders are more protected against payment defaults. This generally makes SBA loans more attractive to lenders, increasing approvals and driving down interest rates. 

The SBA is an independent agency of the United States government founded in 1953 by Dwight D. Eisenhower. In addition to lending programs, the agency provides counseling and contracting expertise as the nation’s go-to resource and voice for small businesses. 

The benefits of an SBA loan to fund a law practice

Securing a business loan can be a great way to grow and expand. Not only will you have access to the capital you need to take your practice to the next level, but there are several other benefits that come with securing a business loan, including saving money and building a strong credit score. 

SBA loan use of proceeds for lawyers

SBA loans are popular for many reasons, one being the wide use of proceeds. Ways to use an SBA loan include: 

Working capital

Working capital is defined as the difference between current assets and current liabilities. It’s the lifeblood of any business. Working capital can be used in many ways including:

  • Payroll costs for attorneys, paralegals, contractors, or support staff
  • Rent or mortgage payments
  • Travel expenses
  • Establishing a second office or expanding your current space 
  • Marketing and advertising costs to help you stand out in your industry
  • Updating equipment and software

It’s very important to have positive working capital to fund operations and meet short-term obligations. 

Debt refinancing

Many attorneys take on expensive debt when initially setting up their practices. That debt may cripple cash flow, hindering day-to-day operations. An SBA loan through SmartBiz can be used to refinance the following:

  • Short-term business loans
  • High-interest business loans
  • Daily or weekly payment loans
  • Business credit cards

Keep in mind that defaulting on debt may drastically lower your credit score, making it difficult  to qualify for lower-cost funds in the future. Refinancing expensive debt can help you avoid missing payments. 

How to qualify for an SBA loan

Lenders and loan programs each have unique eligibility requirements for an SBA loan. For example, some lenders may require a business plan while others do not. (SmartBiz does not require a business plan). Requirements for an SBA loan from a bank in the SmartBiz network include: 

  • More than two (2) years in business
  • Business owner’s personal credit score above 650
  • The business must be U.S. based and owned by US citizen or Lawful Permanent Resident who is at least 21-years old
  • No outstanding tax liens
  • No bankruptcies or foreclosures in the past 3 years
  • No recent charge-offs or settlements
  • Current on government-related loans

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Documents required to apply for an SBA loan for a law practice

A little organization goes a long way when seeking funding - but lawyers are used to that sort of thing! It’s a good idea to work with your accountant or bookkeeper to gather and organize documentation.

The following documents are generally required when applying for an SBA loan. Keep in mind that different lenders may have different requirements. 

  • Personal background statement 
  • Personal tax returns
  • Business and personal credit report (the lender will pull these but it’s a good idea to know where you stand and address any discrepancies before starting an application if needed) 
  • Legal documents (business licenses and registrations, Articles of Incorporation, contracts with third parties, leases for commercial real estate or business equipment, etc.)
  • Plans for use of loan proceeds
  • Business balance sheet 
  • Profit and loss statement
  • Debt schedule 
  • Business tax returns and bank statements 

Choosing an SBA loan lender

Once you’ve determined that an SBA loan is the right fit for your practice, the next important step is to choose a lender to work with.  Things to consider include:

  • Does the lender offer competitive interest rates?
  • What are the loan terms offered?
  • What type of origination, lender, and other fees might you be responsible for?
  • Is there a prepayment penalty? 
  • What is the time to fund? 
  • Does the lender have good customer reviews?
  • Is the lender transparent? 

Although SmartBiz is not a lender, we take the guesswork out of the process by working with multiple banks and finding the lender most likely to fund your loan, giving you back your time. Our streamlined online application, along with our dedicated team of professionals are available to help make the SBA application process simple and low-stress. To get an idea of our top-notch customer service, check out the 5-star reviews below from lawyers SmartBiz helped through the financing process.  

My experience with SmartBiz was excellent. They have a user friendly website/application. Their staff is great…SmartBiz got the transaction closed with a terrific lender. I will use them again for my financing needs and recommend others do the same.

Javier Zayas-Bazan
Zayas Bazan Law, PLLC

Wonderful experience from beginning to end. I was treated with courtesy and professionalism, and treated best of all as an individual with individual needs. Application moved seamlessly through various stages, and at each stage the account manager assigned my file was accessible and responsive. My business is a solo practitioner law firm, presenting certain unique characteristics to my account manager, but he was never fazed. Would recommend SmartBiz without any hesitation for small business owners needing loan assistance to meet various goals.

Stacey A. Ward, Esq.

I had a great experience with SmartBiz Loans… From the time we started until the time my SBA loan was funded was probably about four weeks…Also, the portal was really good and easy to work with.

Law Office of Kelly S. Wachs

Next steps

If you’ve determined that an SBA loan is a good fit for your firm, consider working with SmartBiz. We’re proud to be the leading AI-powered financing platform connecting small businesses with the right capital at the right time.

You’ll find out if you’re pre-qualified in five minutes, with no impact to your credit score.* Start here today.

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