Solicitor Practice Loans & Law Firm Finance

UK law firms can fund themselves through partner capital, retained profit, bank overdrafts and term loans, unsecured professions loans, WIP and disbursement funding, PII and practising certificate premium finance, tax and VAT funding, asset finance for systems and, for licensed bodies, outside investment. Professional Practice Loans, a specialist whole-of-market broker, matches each need to the part of the market built for it.

• Cash cycle: WIP finance, disbursement funding, court fee funding and costs finance carry the outlay on matters until they bill and settle.
• Annual costs: PII premium finance, practising certificate finance, tax and VAT funding and partners’ tax funding spread large single payments.
• General borrowing: an unsecured practice loan, assessed on fee income rather than property, for working capital, recruitment or fit-out.
• Ownership: partner capital loans for incoming partners, buy-out finance for retirements and acquisition finance for buying a firm or a practice area.
• Systems: IT and case management finance for software, hardware and cyber security.

Lenders look at the accounts, lock-up, the case mix, fee earner depth, existing borrowing and the firm’s regulatory record. One line is firm: client money is never a source of funding for the firm, and the SRA Accounts Rules govern how it is held. The Law Society’s overview of funding options for law firms is a useful starting point, and our guide to WIP finance for law firms covers the cash cycle in depth.

Loans for solicitors come from specialist professions lenders, high-street and challenger banks, specialist legal funders for WIP and disbursements, premium finance providers for PII, and asset finance companies for systems. Each has its own appetite for firm size, practice area and structure, so a whole-of-market broker can save a firm from approaching the wrong lenders one by one.

We look at how your firm earns and spends, prepare the case and approach the lenders whose criteria suit it, whether you are a sole practitioner, a partnership, an LLP or a company. Many lenders ask partners or directors for a personal guarantee, and borrowing of £25,000 or less by a sole practitioner or small partnership can be regulated consumer credit. Our guide to preparing a practice finance application sets out the documents to gather.

Yes. A sole practitioner can borrow to set up the practice, spread the first PII premium, carry the months before early bills are paid or buy case management software. With no firm accounts yet, lenders lean on your years of practice, your fee forecast, the work you expect to bring with you and your personal credit. Borrowing of £25,000 or less by a sole trader can be regulated consumer credit, and we say at the outset if that applies. As a whole-of-market broker for law firms, Professional Practice Loans approaches lenders that consider new practices.

• Set up costs. Indemnity insurance, practice management and accounts software, and any office deposit or fit out.
• The first months. Salary for a secretary or paralegal and running costs before the first matters are billed and paid.
• Closing one day. A recognised sole practice that closes pays a run off premium for six years of cover, so build it into long term plans.

It depends on the work. The SRA says a practice offering only non reserved legal services does not need to be authorised, apart from immigration, claims management or regulated financial services work not regulated elsewhere, while reserved legal services need an authorised practice unless you meet its freelance criteria. Those criteria include at least three years of practice since admission, working in your own name with no employees, being paid directly by clients and holding client money only for unbilled payments on account of costs and disbursements. A recognised sole practice needs qualifying indemnity insurance with minimum cover of £2m, and the SRA says decisions typically take about three months.

Lenders ask which route you are taking, so settle it before applying. The SRA explains both in its guidance on becoming a sole practitioner or freelance solicitor. See new practice finance and PII premium finance, or get instant quotes for the first renewal.

Plan for income that arrives in lumps. Conveyancing fees are usually billed and paid on completion, so a run of slow chains or a quiet market pushes income back while salaries, PII and software costs carry on. A revolving facility or working capital loan sized against the firm's pipeline of exchanged matters, an aged debt facility for bills already issued, and PII premium finance for the renewal can all smooth it. We search the market for lenders that understand residential and commercial property practices.

• Your pipeline. Matters at offer, exchange and completion stage, with expected fees and dates.
• Fall through history. How many instructions failed to complete over the last two years, and why.
• Referral terms. Fees paid to estate agents or panel managers, which reduce the net fee per matter.

Client money can never fund the firm. Our practice working capital page sets out the options, or you can get instant quotes for the gap.