Quick answer
Law firms borrow to fund work in progress, pay disbursements on matters, hire lawyers and invest in offices and technology. Lenders look at billings, WIP, debtor days and practice structure, and consider only the firm's office accounts because trust money belongs to clients. Smaller WIP gaps can be unsecured; larger needs usually use property security.
Key points
- WIP and disbursements tie up cash until matters are billed and paid.
- Trust money is not the firm's money — lenders look at office accounts only.
- Outcome-based fee arrangements make timing less predictable.
- Key partner dependence is a common question.
- Common uses
- WIP, disbursements, hiring, office
- Lenders focus on
- Billings, WIP, debtors, structure
- Unsecured options
- Typically $5k – $500k
- Property-secured
- $20k – $5m
Law firms sell time and judgement, and they often wait a long time to be paid for it. Hours are recorded, disbursements are paid, and invoices go out when matters reach a stage — or, in some practice areas, only when the matter ends. Lenders who understand legal practices look at how quickly work converts into cash, and at the practice structure behind it.
What do law firms usually borrow for?
- Work in progress. Carrying salaries and overheads until matters are billed.
- Disbursements. Court fees, expert reports, barristers and searches paid up front.
- Hiring. Lawyers and support staff for a growing practice.
- Offices and technology. Fit-outs, practice management and document systems.
- Partner changes. Buying out a retiring partner or bringing in a new one.
How do lenders look at a law firm?
Billings and collections. Monthly billings and how quickly clients pay. Lenders look at debtor days by practice area.
WIP. How much work is unbilled, and how old it is. Ageing WIP is cash that isn’t arriving.
Fee arrangements. Fixed fees, hourly billing and outcome-based arrangements produce different cash patterns. Outcome-based work can be profitable but unpredictable.
Trust accounts. Trust money belongs to clients, so lenders only consider the firm’s office accounts, and they expect trust compliance to be spotless. In NSW, Victoria and Western Australia, legal practitioners are regulated under the Legal Profession Uniform Law, overseen by the Legal Services Council.
People. Key partners generate much of the work. Support staff such as clerks and legal secretaries are generally covered by the Legal Services Award.
Need to carry matters or grow the team? See what your firm could access — no credit check to enquire.
A closer look: WIP and disbursements
In many firms, the biggest cash drain is invisible on the profit and loss: work done but not yet billed, and disbursements paid but not yet recovered. A litigation practice might carry months of WIP and significant disbursements across several matters. A conveyancing practice might turn work into cash within weeks.
Lenders want to understand your mix. They’ll look at WIP by practice area and age, disbursements outstanding, and your history of converting WIP into collected fees. Firms with disciplined billing — regular interim invoices, clear costs agreements, prompt follow-up — convert faster and borrow less.
A line of credit often suits WIP funding because it expands and contracts with the matter cycle. For partner buy-outs or office purchases, a term loan secured over property is more common.
Firms that can show, matter by matter, how long WIP typically takes to become cash give a lender the confidence to size a facility properly — rather than guessing and offering something too small to help.
Documents that help
| Document | Why it matters |
|---|---|
| Office account statements | Firm income and costs |
| WIP and billing reports | Cash tied up and conversion |
| Practising certificates | Confirms lawyers can practise |
| Financial statements | Margins and trends |
| BAS | Turnover confirmation |
Red flags for law firm loans
- Large WIP not billed.
- Matters paid on outcome only with no timing certainty.
- Key partner dependence.
- Slow-paying clients.
- Trust compliance issues.
Questions a lender will ask
- What are your main practice areas?
- How much WIP do you carry, and how old is it?
- How quickly do clients pay?
- How is the practice structured?
- What will the funds let you do?
How to strengthen a law firm application
Provide WIP and billing reports by practice area, aged debtors and a summary of disbursements outstanding. Show office account statements. For partner buy-outs, include the partnership agreement terms and valuation.
When should a firm apply?
Before WIP builds to uncomfortable levels, or before a hiring round or office move.
What does a sensible law firm facility look like?
Firms usually need two kinds of funding, and they work best kept apart. Working capital — WIP, disbursements, the gap between billing and collection — suits a line of credit that grows with busy periods and shrinks as matters settle. Longer-term investments — a partner buy-out, a new office, a practice acquisition — suit a term loan, often secured over property.
Mixing the two can leave a firm with a large fixed loan when it really needed flexibility, or a revolving line stretched to cover a long-term purchase. A lender or broker who understands legal practices will help you separate them.
It also pays to look at what’s driving the need. If WIP is high because billing is irregular, tightening billing practices — interim invoices, clear costs agreements, prompt follow-up of overdue accounts — may reduce the facility required. Lenders notice firms that manage their own cash cycle well.
Illustrative scenarios
Illustrative: disbursements on several matters. A litigation firm needs $150k to carry disbursements on several matters. A second mortgage over the principal’s property funds the gap.
Illustrative: two new lawyers. A commercial firm wants $80k to hire two lawyers ahead of new client work. Steady billings support an unsecured facility.
Secured or unsecured for a law firm?
Unsecured options of $5k to $500k suit smaller WIP gaps, sized on turnover and bank statements. Property-secured loans from $20k to $5m suit larger needs. See the accounting practice and real estate guides for other professional firms.
Could your firm qualify?
A 60-second enquiry gets it started. There’s no credit check when you first enquire, and your details aren’t handed around to a crowd of lenders. A real person who understands WIP and disbursements will call you. Please be accurate about turnover, the amount and any property so we can find the right fit first time.
Frequently asked questions
Can a law firm borrow against work in progress?
WIP isn't security on its own, but lenders consider it when sizing a facility. A record of WIP converting to billings and collections supports working-capital lending.
Do lenders look at trust accounts?
No. Trust money belongs to clients. Lenders look only at the firm's office accounts and expect trust compliance to be in order.
Can a firm fund disbursements on long matters?
Yes. Litigation and other long matters can require significant disbursements before a result. Lenders look at the firm's matter mix and history of recovering costs.
Can I borrow to open a new office?
Yes. Lenders look at the firm's performance and the plan for the new office. Property security helps for larger amounts.