Business Development

17
Oct
2017

Business Development:

6 ways to fund your new law firm

Rachel Sabo and Gina Piacentio
Columbus, OH

Starting your own firm? Here’s how to afford it

The most important question to consider when you’re opening your own firm is, “How am I going to survive financially while building my brand?” First, make a list of your expenses to begin, such as a printer, scanner, computer, furniture, rent, utilities, etc. Next, it’s time to figure out to pay for all of those expenses. Start by exploring these six options for how to fund your firm.

1. Personal savings

Law school is expensive. Most people who consider starting a firm probably do not have personal savings. If you do, good for you! Use it, and use it wisely. If you are going to bet on yourself while spending your personal savings, you must be prepared to succeed. Don’t waste your personal savings without formulating a plan because it will run out quickly. Maximize your use of personal savings by minimizing monthly expenses, overhead and initial cash investment.

2. Loans from friends and family

If you are lucky enough to know someone who may invest in your future, approach them with your business plan and a presentation. Leave them with no doubt that you are well prepared for what is ahead. Be sure to plan ahead for what the return on investment will be. Personal loans are not without problems, however. Conflicts of interest could exist, not to mention animosity if the business does not perform as well as expected and you are unable to pay.

3. Personal credit cards

Although a lot of credit cards have a high interest rates, those of you with reasonably good credit could consider applying for a card with no annual fee/low annual fee and a low interest rate. Some credit cards offer 12 months interest free, which would be beneficial while you are building your business. But, be careful to avoid high interest and over-spending. There is nothing worse than accumulating credit card debt to start a business.

4. Bank loans

If you are just starting out, you will not have an established stream of income to present to the bank to qualify for a loan. It may be difficult to obtain a bank loan for a new start-up. Each bank is different but there are a few who will lend to new businesses if you present your business plan and operating agreement. Be prepared to personally guarantee the loan if you are an LLC, PC or LLP. This may be the most difficult option for brand new law firms.

5. SBA loans

In limited circumstances, a Small Business Administration (SBA) loan may be an option for a small law firm. The SBA does not make loans directly to borrowers but it can provide loan guidelines and guarantees to banks who will then lend to the borrower. Look at the SBA website to find out if you’d be eligible for this type of loan.

6. Local business incubator

Local business incubators are a great option. These incubators typically offer an office setting, shared by several lawyers who participate in the program, for a relatively inexpensive monthly rate. Typically, you have your own office and share common spaces, such as a conference room and lobby, along with use of printers and fax machines. You have the opportunity to interact with other lawyers who are in the same space, ask for advice and bounce ideas off of one another. This is also a great referral source and you usually get some kind of mentoring or professional development service.​