Line of Credit for Attorneys

A line of credit for attorneys provides flexible funding to solve the cash flow issues that often are experienced by attorneys. There are various forms of credit lines, each with features that can meet the specific needs of a law firm.

Solving Cash Flow Issues

Attorneys frequently experience cash flow problems due to the nature of their business. The expenses of preparing and trying a case, combined with the operating expenses of running the law firm, need to be paid even though the firm will not be fully paid until the case is settled. The longer the case, the greater the potential for cash flow issues and the greater the need for a line of credit.

A line of credit provides the convenience of having funds available when needed. The credit line is pre-approved and ready for use when the lawyer or legal firm requires cash. Interest is only charged on the credit that is used. A credit line gives you flexibility. When your repay the credit used, it is available for use again when cash flow is tight.

Finding a Line of Credit for Attorneys

Not all credit lines are the same. The best credit line for an attorney is the one that meets their particular needs in terms of line amount, access and reporting:

• Amount of line – Credit lines can be set up for an established amount of credit or the credit line can be variable.
• Convenient access – Credit line funds can be available in a variety of ways including by credit card, check or by requesting a transfer of funds into the firm's checking account.
• Detailed reporting – Look for a credit line that provides the level of documentation needed to include with the settlement case sheet.

A line of credit for attorneys can be set up through a financial institution such as a bank or credit union. Or, there are loan companies that provide specialized types of lending such as loans and credit lines for attorneys.

Regardless of where you set up your line of credit, the process is very much the same. First, you will need to provide information about the finances of your law firm and a projection of your funding needs. Your information will then be reviewed along with your credit history to determine whether the line of credit will be granted, and if so, the amount of the line. It may take up to thirty days to review your application materials and determine whether the line of credit will be established.

Change Lines as Needs Change

Not all law firms need the same features in a line of credit. Over time, the needs of a law firm may change. This can result in changes in the features required in a firm's line of credit. A new firm may have less in capital reserves and may require the flexibility of a credit card or check that can be used to access their credit line whenever funds are needed. It's essential for attorneys to be able to get funds needed for situations such as paying for airfare to go interview a potential witness or to purchase custom-designed trial exhibits.

As a firm becomes more established it usually will have larger capital reserves and may not need the everyday convenient access of a credit card or check-based line of credit. Even with capital reserves a firm may not want to use its capital to pay trial-related expenses until the conclusion of a case. A pre-established line of credit lets the firm contact its financial provider and request that a specific amount of money be transferred to the company checking account. This will give the firm immediate access to the funds needed.

Shop for the Best Fees and Rates

Rates and fees vary from line to line. Look for the line that will meet your needs for the lowest fees and interest rates. Here are a few things to consider:

• Application fee - Some lines require an application fee, whether or not you are approved for the line.
• Maintenance fee – A line of credit might have a monthly fee, even if you don't use the line.
• Check fee – A check-based line of credit might charge a one or two percent check fee whenever you write a check to draw funds.
• Interest rate – Most lines of credit have a variable rate of interest. Some lines are offered with an introductory interest rate.

A line of credit is a convenience. Be sure you don't end up paying too much for that convenience. Shop around before you establish your line of credit.

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