Growing a Law Practice with LegalMatch Financial Services for Attorneys.

Just as with other small businesses, a law practice needs the right financing to grow. Unfortunately there appears to be a deep-seated, unwarranted bias on the part of most banks and lenders against lawyers. It is probable that this bias stems from a perception that, in general, lawyers are okay with defaulting on their contractual obligations, and feel empowered in defending themselves (and thus avoiding out-of-pocket attorney’s fees that would normally defer other potential loan applicants from defaulting). Thus, despite any statistical justification, the lenders feel that their risk is higher. Rather, the opposite is probably true: The sanctity of contract is something familiar to most lawyers from the days of law school, and they generally take their contractual responsibilities more seriously than John. Q. Public does.

So, even though lawyers make good borrowers, this explains why America’s small firms and solo practitioners have a perceived image problem that is an impediment to them easily finding reasonable small business loans and lines of credit needed to grow their law practices.

As a law practice is like any other small business – it needs office space, staff, computers, desks, hardware, software, copiers, fax machines, supplies, and myriad other resources that any small business needs. Additionally, every practice has to constantly and consistently acquire new clients. This requires advertising, marketing, and other out-reach efforts to locate, entertain, and retain new clients – often requiring third party assistance to do this, which in turn, requires money (operating capital).

However, a law practice is at a disadvantage to other small businesses: because of the aforementioned bias, a law practice has a more difficult time finding a good (defined as reasonable rates and terms) business loan to provide that operating capital.

So what are the advantages of a business loan compared to a personal line of credit or a home equity line as a means of financing practice growth?

1. Generally the loan is to the law practice itself and not you personally, and although you may be required to guarantee the loan, it appears as an obligation of the law practice.
2. Interest rates for business loans have a tendency to be lower than personal loans, and typically range from Prime Rate + 2% to Prime Rate + 5% (The current prime rate is hovering around 5% per year).
3. Business loans are available in amounts which are significantly larger than personal lines of credit.
4. Last, a home equity line results in a lien on your real property, whereas most business lines of credit do not require real estate collateral.

How do small firms and solo practitioners go about finding a good business loan? LegalMatch has found that many of its attorney members needed good business loans. Accordingly, LegalMatch created LegalMatch Financial Services, with the goal of helping its Member Attorneys obtain favorable rates and terms for business loans and various financial products and services.

After an extensive search (that underscored that the above theory of bias towards attorneys does exist), LegalMatch Financial Services located a lender who shares our view that lawyers make good borrowers. The lender is Telesis Community Credit Union. LegalMatch has established a relationship with Telesis and its subsidiary Business Partners, LLC, by which Telesis can provide, at favorable terms and rates, both LegalMatch lawyers and non-member attorneys with small business loans and other types of credit lines.