By industry
Financing a professional services firm when your only asset is people
Service firms have no inventory, no equipment, and receivables that are hard to pledge. Here is what lenders will actually do.
The collateral problem
A law firm, accounting practice, agency, or consultancy has almost nothing a lender can repossess. The value is in relationships and people, both of which walk out at five o'clock. That pushes financing for these firms almost entirely onto cash flow and personal credit.
The good news: professional service firms with stable billings and low overhead often show excellent coverage ratios, which is exactly what cash-flow lending rewards. And SBA lending exists precisely to bridge situations where a sound business lacks collateral.
What works
| Need | Best fit |
|---|---|
| Partner buy-in or buy-out | SBA 7(a) — the standard route |
| Acquiring a book of business or a small firm | SBA 7(a) |
| Cash flow between billing and collection | Line of credit or AR financing |
| Hiring ahead of revenue | Line of credit |
| Office build-out | SBA 7(a) |
| Buying office space | SBA 504 |
| Technology and equipment | Equipment financing |
What underwriting looks at
- Realisation and collection rates, not billings. What you bill and what you collect are different numbers and lenders care about the second.
- Client concentration. One client at 30%+ of revenue is a genuine risk, particularly when the relationship is personal to one partner.
- Recurring versus project revenue. An accounting practice with annual compliance work is a materially stronger credit than an agency living on project wins.
- Partner compensation. Lenders normalize owner comp to market before computing cash flow. A firm where partners take everything out shows no coverage until this is adjusted — present the normalized numbers yourself.
- Work in progress and unbilled time, which is real value that never appears on a cash-basis statement.
One structural note
Many professional practices are cash-basis for tax purposes, which understates the business's economics — it excludes receivables and work in progress entirely. If you are borrowing, prepare an accrual-basis view alongside the tax returns. It is more work and it frequently changes the loan size a lender will support.
Questions people actually ask
Can a law firm get an SBA loan?
Yes. Professional practices are eligible, and partner buy-ins and practice acquisitions are common 7(a) uses. Note that the borrower is generally the firm and the guarantors are the owners — and each state's rules on law firm ownership can affect how a buy-in is structured.
How do I finance a partner buy-in?
Usually an SBA 7(a) to the individual buying in, or to the firm, depending on the structure. The partnership agreement's valuation method drives the deal, so have it reviewed before you approach a lender. Seller financing from the departing partner is common and can reduce the cash you need.
Can I borrow against unpaid client invoices?
Sometimes, through AR financing, but professional service receivables are harder to finance than commercial trade receivables — they are more disputable, and in some professions confidentiality and ethics rules restrict assignment. Check your professional rules before you pursue it.