Question – I want to start a law firm and need $60,000 for start up costs and filing fees. I have been practicing in my field for 3 years, have established client base and contacts. I have a 620 credit score, primarily due to high law school loans.
Our Response – There are two potential issues to overcome to get financing for your law firm. First of all what are you purchasing with the $60,000. If this money is going to soft costs such as filing fees, leasehold improvements, advertising, etc you will need to find collateral to back to loan as once you spend money on these items, the money is gone and the bank has no security. Second your credit score is low for today’s banking environment. 650 is a minimum score that most banks are willing to lend at so some work is required to improve it. Another thing that isn’t mentioned is how much are you putting towards the project. Banks will typically want to see the entrepreneur put in 20%. If you aren’t putting any money in, why would the bank have any faith in this being a successful venture?
There are a few solutions to funding your law firm though.
- Reassess your costs – Do you really need $60,000 to get started or can you get by on less?
- Save some money – Save come cash from your job until you have at least 20% of the total project.
- Investors – By borrowing or securing investment capital from friends and family you can bypass the bank and obtain the money needed to start.
- Microloans – While they can’t cover the entire cost of the project, you may be able to get a portion of the funding through local economic development funds – Check out our list of revolving loan programs.
- http://businessloanfunds.com co-signer – Having a family member that believes in you could possibly co-sign on the loan making it possible for the bank to make a loan.
- Customer financing – You may have contacts that will be customers when you first open. Possibly you can get them to give you a retainer and use that as startup money.