As a law firm owner, you know what’s best when it comes to business support for your practice. Over the course of managing your firm, you may seek out new staff, an accounting professional during tax season, or a better location for your office. But when contemplating law firm financing, there are many factors to consider when seeking to optimize the amount of funding you can get for your firm.
- Have your financial data in order
This should be a no-brainer, but most financing companies are going to take a look at your financial statements and supporting documentation before advancing money to you.
Some of the areas that stand out when a third-party is assessing your financial condition are:
- Credit score—one of the preliminary steps a lender will take to assess your firm is to review your credit score. It’s important to be within the normal range to entice the financing company to move forward in the application process. If your credit score currently sits below average, you may want to work toward increasing it before beginning the process. You don’t want a substantial hurdle in the very beginning stages and low credit scores are never a good indicator from a lender’s perspective.
- Liquidity—the fact remains that “cash is king.” Having assets that are easily converted to cash—such as accounts receivable, stocks or bonds, will make it easier to act when new opportunities arise. It also demonstrates to a lender that you—and your practice—are stable and well functioning.
- Accurate analysis—have a good idea of your expenses and the type of return you’re generating from spending. It’s inevitable that as a lawyer, you’ll have substantial expenses to support both your caseload and the growth of your firm. Lenders understand that, and being prepared to justify your expenditures will simply help assure the lender that you have a firm grasp on where the money will be deployed and whether it is a good investment.
- It’s all about having good people
Commonly offered wisdom in the business world is to hold on to your best people because they’re your greatest assets. By having the right staff in place, your firm is more likely to run smoothly and to achieve success, therefore demonstrating to a potential lender that your business is stable and can meet its financial obligations without any trouble.
- Management is key
No matter what business you’re in, management of the company and its dealings is paramount to its success. You need processes in place that aid in the achievement of your endeavors and help your staff do things the right way with ”best practices” in mind. There are two key components:
- Case Management—using a case management system (“CMS”) allows you to provide information about your portfolio to your lender instantly. Having pertinent (and non-confidential) information readily accessible, such as the history and status of your cases, shows that you are well organized and informed and helps your entire team to stay up-to-date on the firm’s current inventory.
- Procedural Management—if you have a solid system in place for how you manage your case portfolio, it will make estimating the timing of your fees much easier. This, in turn, will help you support your request for financing and assist your staff in knowing where resources will best be allocated depending on the status of each case.
The bottom line is that when you’re going down the law firm financing road, you are best served by being organized and informed on the business side of your practice. This will give you the best chance at attaining all the financing you need.