Can a law firm get a business loan without a personal guarantee or with bad credit?

The short answer

Bad credit: yes. A law firm can get working capital or receivables funding from Billable Capital with no minimum credit score at all. The decision is made on the firm’s operating-account bank statements — deposits, average daily balance, who the money comes from and how often — not on the owner’s FICO.

No personal guarantee: mostly no, with one honest exception. Working capital, a line of credit and a term loan all require a personal guarantee from the owner or owners. The product that leans least on the owner personally is receivables funding, because the credit being underwritten is the client who owes the invoice. Even there, expect to sign a guarantee that the invoices are valid and undisputed. Anyone promising a law firm unsecured capital with no guarantee of any kind and no minimum credit is not describing a real product.

Why a law firm’s credit file looks worse than its business

Three things happen to a firm owner’s personal credit that have nothing to do with whether the firm can repay.

1. Case costs on personal cards. Experts, records and deposition costs on a contingency matter get fronted on the partner’s own card and carried for a year. High utilisation drags a score down even when every payment is on time.
2. The slow quarter. A corporate client that pays on day 75 instead of day 30 can produce a missed personal payment in a month where the firm itself is profitable on paper.
3. A prior firm. Many solo and boutique practices were founded after a dissolution or a departure, and the old firm’s debts sometimes follow the partner personally.

A score-first lender sees the result and declines. A statement-first underwriter sees a firm depositing $40,000 a month from twenty clients, holding a steady balance, with a trust account that is properly separate — and prices it.

What each product requires from you personally

• Working capital: no minimum credit score. Personal guarantee from the owner(s) required. No collateral. $10,000 to $2,000,000 over 3 to 18 months, funded in 24 hours.
• Receivables funding: no minimum credit score. The client’s credit is underwritten. A validity guarantee is standard; a full performance guarantee is not the point of the product. Up to 90% of a billed, undisputed invoice to a business client, advanced within 24 hours. Contingency fees cannot be funded until the matter resolves and the fee is billed.
• Line of credit: 600 minimum FICO, personal guarantee, UCC-1 filing. No assignment of receivables.
• Term loan: 650 minimum FICO, 24 months in business, personal guarantee and a UCC-1 blanket lien.
• SBA 7(a): 680 minimum FICO. The SBA requires a personal guarantee from every owner of 20% or more. There is no way around this one.

What the underwriter reads instead of your score

Send three months of statements for the operating account — not the IOLTA or client trust account, which holds client money and is not revenue. Four months if your fees arrive in lumps. We look at:

• Deposits — the $15,000-a-month floor, and whether the firm is six months old.
• Spread of payers — retainers from many clients read stronger than one payer, but one payer with a master services agreement is priced, not declined.
• Average daily balance — whether the account lives at zero between client payments or carries a cushion.
• NSFs — a few around a slow-paying client are normal; a pattern around every payroll is not.
• Open positions — tell us up front. A consolidation into a term loan is often the right structure.

A practical sequence for a firm with weak personal credit

1. If the firm bills business clients on terms, open a receivables facility first. It has no minimum credit score, it is usually the cheapest of the fast products, and it does not depend on the owner’s profile.
2. Use working capital for what receivables funding cannot touch — case costs on contingency matters, payroll between retainers, a hire ahead of the engagement. No minimum FICO; the payment is fixed and sized to your slowest month.
3. As the statements build, move to a line of credit at 600+ and a term loan at 650+. Both are cheaper than an advance and both reward a clean deposit history.
4. Keep the trust account clean and separate. Nothing in a file is read more carefully by a lender to a law firm.

Applying does not affect your credit. Bank statements are reviewed first; on a credit-qualified product a pull happens only when you move forward, and we tell you before it does.