Solicitor practice loans for law firms and LLPs

Most law firms are profitable on paper but carry long cash cycles. Fee earners' time becomes work in progress (WIP), then a bill, then cash, sometimes months later. Disbursements are paid out before they are recovered, and large annual costs such as professional indemnity insurance arrive in one lump. Finance smooths those peaks so the firm can pay staff, suppliers and HMRC on time.

Solicitor practice finance is generally available to SRA-regulated firms with a record of profitable fee income, controlled lock-up and clean credit for the partners, members or directors. Lenders look at:

• Accounts for the last two years and current management figures
• Fee income by work type, and how concentrated it is in a few clients
• WIP and debtor levels and how quickly bills are paid
• Business bank statements (office account only; lenders do not rely on client account money)
• Existing borrowing and professional indemnity arrangements
• Credit history of the firm and its partners, members or directors

We can help limited companies, LLPs, partnerships and sole practitioners registered and trading in the UK. Borrowing of £25,000 or less by sole traders and small partnerships can be regulated consumer credit, which brings additional protections.

Most borrowing by law firms is secured on the firm rather than on property, through personal guarantees from the partners or members and, for larger facilities, a debenture over the practice. Client account money is held for clients under the SRA Accounts Rules, so it is never available as security and lenders exclude it when assessing liquidity. Invoice discounting is secured on the firm's debtor book, usually with a warranty from the partners that bills are valid. Buying your office or releasing equity from it is different: a solicitor office purchase loan takes a legal charge over the building. In a partnership or LLP, check how guarantees are split between partners and what happens to a retiring partner's guarantee, as this often matters as much as the price of the loan.

PII, VAT and other short-term funding for an established firm typically takes from a few days to two weeks, while acquisitions and mergers usually take a few months. Short-term loans move quickly because lenders mainly need accounts, office account statements and the premium schedule or tax liability. Revolving and invoice-based facilities take longer, as the lender reviews WIP, debtors and billing patterns. Acquisitions depend on due diligence, the agreed price mechanism, SRA approval of new owners and managers, and run-off cover arrangements for the selling firm, each of which has its own timetable. Partner buy-outs rely on the partnership or members' agreement being settled first. Start funding for a PII renewal well ahead of the renewal date, since the premium is often only confirmed shortly before it falls due.

The main alternatives to a general practice loan are purpose-built facilities that match how a law firm's cash actually moves. WIP and disbursement funding advances against work done and costs paid out on files, rather than lending a fixed sum. Partners can inject capital personally through partner capital loans, keeping borrowing off the firm's balance sheet. PII funding spreads the renewal premium on its own terms. Reducing lock-up by billing on account and chasing aged debt can also release cash without borrowing at all.