Prudence advises that the entrepreneur start a new business with a savings account sufficient to pay one year’s worth of expenses. Prudence may have been endowed with a large trust fund, the rest of us apply for bank loans.
There are two common forms of business credit available to small law firms. A business installment loan provides a lump sum up front with set monthly repayments made over a set period of time, usually 5 years. The business installment loan is best for big purchases of the physical things you need to run the firm. The other form of credit is the business line of credit, which is just a giant credit card, best for easing the strains of uneven cash flow. The interest on a business loan is tax deductible. Both forms of credit have origination fees, which range from 1 to 2 percent of the loan, as well as application fees. The line of credit also has an annual fee of about one percent of the total credit available, whether or not you are actually using that credit at the time. Part or all of the application fees may be waived. Be sure to discuss this with the loan salesperson.
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