Law Firm Loan Requirements: What to Prepare Before You Apply
Attorneys spend their careers assembling organized, persuasive files for others. When it is time to finance their own firm, the same discipline pays off. A complete, well-organized loan package helps a lender understand the firm quickly, reduces follow-up requests and makes it easier to evaluate the request on its merits.
This guide covers law firm loan requirements: the documents and information lenders typically request for acquisitions, partner buyouts, office purchases, refinancing and working capital. Requirements vary by lender, loan program and transaction, so treat this as a preparation guide rather than a definitive list. For how lenders analyze the numbers once they have them, see our article on how lenders evaluate law firm cash flow.
Business Financial Documents
- Business tax returns for several recent years
- Year-end financial statements and current interim statements
- Accounts receivable aging and, where tracked, unbilled work-in-progress reports
- Revenue reports by client, practice area and fee type
- A debt schedule listing every loan, line of credit, lease and obligation, including payments owed to retired partners or prior sellers
- Bank statements, which lenders may compare to reported revenue
Be sure the numbers reconcile. Differences between tax returns, financial statements and bank deposits are common in professional firms, but they should be explainable.
Owner and Partner Documents
- Personal tax returns for each significant owner
- Personal financial statements showing assets, liabilities and liquidity
- Resumes or biographies describing each owner’s legal experience and practice areas
- Confirmation of each attorney’s good standing in the jurisdictions where they practice
- Authorization for credit reports
Owners meeting a lender’s or program’s ownership thresholds should expect to provide personal guarantees.
Firm Governance Documents
- Entity formation documents
- Partnership, operating or shareholder agreements
- A current ownership schedule
- Any agreements governing payments to retired or departing partners
Lenders want to understand who owns the firm, who has authority to borrow and what obligations the firm already carries to current and former owners.
Transaction-Specific Documents
Acquisitions
- Letter of intent or purchase agreement
- The seller’s financial statements and tax returns
- Revenue and receivables detail for the practice being acquired
- A transition plan describing the seller’s role and client introductions
- Any seller financing terms
Lenders will review many of the same items a buyer examines in diligence. Our law firm due diligence checklist can help organize them.
Partner buyouts
- The partnership agreement’s buyout provisions
- The proposed buyout terms and valuation
- Revenue originated or managed by the departing partner and the plan to transition it
Office real estate
- Purchase contract and property information
- How much of the building the firm will occupy
- Current lease terms and occupancy costs for comparison
Refinancing
- Statements for each obligation to be refinanced
- Explanation of why the firm is refinancing and how the new structure improves cash flow
If refinancing is part of a broader effort to relieve cash strain, see our guide to law firm debt restructuring.
Projections and Narrative
Many lenders appreciate a short narrative explaining the firm, its practice areas, its clients and the purpose of the loan. Projections should show revenue, expenses, partner compensation and debt service under realistic assumptions. For acquisitions, projections should account for possible client attrition during the transition.
SBA-Specific Requirements
SBA-backed loans include additional forms and eligibility requirements. Our guide to SBA loans for law firms explains how SBA financing is commonly used for practice acquisitions, buyouts and office purchases. To estimate payments while you prepare, try our SBA loan calculator. Actual terms depend on the lender, the borrower and the transaction.
Common Reasons Law Firm Loan Requests Stall
- Financial records that do not reconcile
- Undisclosed obligations, such as payments to retired partners or short-term financing
- Revenue heavily concentrated in one client or one attorney without a plan to address it
- Unrealistic projections, especially in acquisitions
- Insufficient equity or liquidity
- Missing governance documents or unclear ownership
A Pre-Application Checklist
- Gather business and personal tax returns and financial statements
- Prepare receivables and work-in-progress reports
- Build a complete debt schedule
- Organize governance documents and ownership details
- Assemble transaction documents
- Write a brief narrative and realistic projections
- Confirm each owner’s personal financial information
Preparation Pays Off
A thorough package does not guarantee approval, but it allows a lender to evaluate the firm accurately and focus on the real strengths of the request. It also tends to make the process smoother for everyone involved.
US Professional Funding helps established law firms and attorneys prepare and evaluate financing for acquisitions, buyouts, office real estate, refinancing and working capital. Visit our law firm financing page to learn more.
