A law firm line of credit is a revolving loan that you can draw from to cover case costs, expert witness fees, payroll, and office rent, among other day-to-day expenses. Similar to a business credit card, you only pay interest on the credit you withdraw, and as you repay, it becomes available for use again.
This flexibility helps you bridge cash flow gaps that arise after providing legal services while waiting for client payments. You don’t have to reapply for a new loan every time you need funds.
In this article, we cover the requirements law firms must meet to qualify for lines of credit and how they can apply.
At the end, we discuss factors to consider when selecting a financing company for your line of credit, so you can close quickly and secure the best interest rates.
Submit just four months of bank statements and we’ll send you law firm line of credit offers that can close on the same day or the next.
| Funding Features | Redline Capital Terms |
| Loan amount | $30K to $750K |
| Line of credit term | 12 to 24 months |
| Repayment terms | Monthly and weekly |
| Minimum FICO score | 600 |
| Minimum time in business | 12 months |
| Your firm’s cash flow minimum | $30K |
What You Need to Qualify for a Law Firm Line of Credit
The type of lender you choose will largely determine the eligibility requirements you’ll need to meet. Generally speaking, there are two main law firm financing providers: traditional banks and revenue-based financing companies.
You’ll typically need the following when applying through a bank:
- A credit score of 720 or higher.
- A practice history of three years or more.
- Two years of tax returns confirming consistent revenue and profit growth.
- Personal guarantees or collateral such as bank accounts, commercial real estate, future receivables, or office equipment.
- Cash reserves equivalent to three months of operating expenses. This shows that you can weather short-term cash flow gaps and still make monthly payments.
- Retainer agreements and other documents that demonstrate you receive recurring business from a stable client base.
Because of these strict and borderline unrealistic requirements, most law firms don’t qualify for bank loans; those that do rarely secure the amount they need.
As a result, many law firms are turning to revenue-based financing companies. Like the name implies, revenue-based financing providers mainly consider your law firm’s revenue. They don’t require cash reserves, collateral, perfect credit, or accounts receivable. This makes it much easier to qualify for a line of credit; you just need to meet the minimum monthly revenue requirement.
Using ourselves, Redline Capital, as an example, you only need to meet three criteria:
- Generate more than $30K in monthly revenue
- Be based in the U.S.
- Be in practice for at least 12 months
A further advantage of our easier qualification criteria is that you can secure large credit limits, typically 2x your monthly revenue. Banks, on the other hand, very rarely extend lines of credit of more than 50% of your monthly revenue.
How to Apply for a Law Firm Line of Credit
Applying for a line of credit at a large bank will require you to walk into one of their branches and talk with a loan officer. You have to explain your situation to them and why you’re applying for financing.
The loan officer will come back to you with all the paperwork you need to apply (e.g., balance sheets, tax returns, profit and loss statements, proof of reserves, AR reports). Once you’ve submitted your application, the bank will send your paperwork for underwriting, which usually takes between two weeks and three months.
If you want to shop around for the best rates, you’ll need to repeat this application process for each bank you apply to.
On the other hand, applying to a revenue-based financing provider like Redline Capital is significantly easier. It only takes five minutes, and you receive your line of credit in a day or two:
- Complete this half-page application form and submit four months of bank statements. We send your application to underwriters who’ll review your monthly recurring revenue and run a soft credit check to help calculate the amount you qualify for. This doesn’t affect your credit score.
- We email you multiple offers for a law firm line of credit within a few hours. As we mentioned earlier, we can get back to you with offers so quickly because we mainly underwrite revenue, not all the other factors that banks look at.
- Once you’ve selected an offer, we’ll send you a link to a portal where the funds are held. You can withdraw funds from this account into your business bank account as needed. This entire application process, from submission to funding, takes one to two days. In special cases where law firms needed funding more quickly, we’ve closed in under five hours.
Why Choose Redline Capital for Your Law Firm Line of Credit
Redline Capital is a revenue-based financing company that offers accessible lines of credit options for law firms that can close on the very same day.
We founded Redline Capital because we’ve seen how difficult it is for small to medium-sized law firms to secure bank financing. Banks are very risk-averse lenders and almost expect firms to be in near-perfect condition before greenlighting their application. With Redline Capital, we’ve structured our requirements to make them accessible to most law firms.
Here’s what clients say about our line of credit financing options:
You can hear more from our clients by heading over to our case studies page:
Below, we cover the factors that set us apart from other law firm funding providers.
We Help You Secure the Most Competitive Terms Available
We help you secure better rates and terms than you’d typically get from other financing solutions. The reason for this is that we’re a broker with decade-plus-long relationships with top business lenders. We bring in hundreds of quality applications for these lenders, and in return, they offer us preferred pricing, wholesale returns, and higher credit limits.
Essentially, when you apply through us, you leverage our relationships with top lenders to secure more competitive rates and terms than you would as a direct applicant.
These relationships also give us stronger negotiating power, ensuring that lenders put forward their best possible offers. If your application is borderline and might normally be rejected, we can often persuade lenders to make exceptions and approve it.
Important note: We pride ourselves on being professional and not putting any pressure on you to accept offers. We send you multiple lines of credit offers and give you the space to decide which works best, or whether to move forward at all. Many litigation financing providers don’t care what’s best for your business and will phone you nonstop, pressuring you to accept expensive terms.
Read more: Top 5 Private Lenders for Business Loans & How to Choose
We Have Deep Expertise in the Legal Sector
We’ve financed countless law firms across the U.S. This experience gave us a deep understanding of the nuances of your firm’s needs, which benefits you in two ways:
- Tailored underwriting: We understand that most law firms generate revenue irregularly because of the industry’s nature, with contingent fees, settlements, or delayed client payments. As a result, we won’t reject or overprice the line of credit due to inconsistent cash flow, unlike banks and other revenue-based financing companies.
- Repayment terms that fit your firm’s financial goals: We can present you with offers that align with your case timelines or billing cycles. For some of our law firm clients, we’ve even set up plans that allow them to make interest-only payments until a settlement or client payment is received. Lenders without experience in the legal sector rarely offer this level of flexibility for your financial needs.
We Can Help You Secure Alternative Financing Products If You Don’t Qualify for a Line of Credit
With banks and most revenue-based financing companies, if you don’t qualify for a line of credit, they simply send you a rejection letter, and that’s the end of the engagement. You’re left on your own to secure an alternative source of capital.
With Redline Capital, we take a more borrower-centric approach. If we see that you’re unlikely to qualify for a line of credit, we offer financing products that are easier to qualify for, such as working capital loans, SBA loans, cash advances, and term loans, often with the option to close on the same day. You aren’t alone in securing financing after initially being rejected for a line of credit.
Frequently Asked Questions
What Credit Score Is Needed for a Line of Credit?
The lender you apply with will determine the minimum credit score you need to meet. Most banks ask for a credit score of 720 or more. However, a revenue-based financing provider like Redline Capital only requires a 660 credit score because their main consideration is your revenue. The higher your credit, though, the better rates you qualify for.
What Is a Law Firm Line of Credit?
A law firm line of credit is a revolving loan that can help law firms weather cash flow gaps and pay for operational costs, branch expansions, technology upgrades, training investments, and more.
When Should I Obtain a Line of Credit?
Businesses usually turn to lines of credit when they need to start paying case expenses, perhaps they need to take on a new case, but they are still waiting for payment for previous jobs. Lines of credit tend to be a better option in these scenarios because businesses don’t need to apply for a new loan every time they require additional financing.
How Can Legal Financing Help My Law Practice?
Legal financing can help your firm bridge cash flow gaps that arise between resolving a case and receiving payment. During this gap, you can use a line of credit to start new jobs, settle payroll and legal fees, and pay for investigations related to cases, among other things.
How Do I Apply for a Line of Credit for My Law Firm?
You have two financing options when applying for a law firm line of credit. You can approach a bank, but they have strict requirements, as businesses typically need a credit score of 720 or higher, strong growth, collateral, and more. Alternatively, you can apply through a revenue-based financing company like Redline Capital, which has more accessible requirements; you only need $30K in monthly revenue, be based in the U.S., and have been in practice for 12 months or more.
Secure an Affordable Line of Credit for Your Law Firm with Redline Capital
Provide four months of bank statements through this short form and we’ll send you line of credit offers the same day.