Expand Your Legal Practice with a 504 Loan

Posted on | by Barbara Morrison

Law firms across the nation have been growing around 2% annually over the past seven years, which is slower than the 7% seen in years prior.  This kind of lag is expected for an economy coming out of a recession, and could actually position your firm well to ride the  upswing of growth to come.

If you are ready to expand, now could be a great time to explore financing options with interest rates still holding low.  When looking to expand it usually comes down to workload capacity. If you are currently maxed out you will need to hire more help. In order to hire more help however, you will need more space. There are multiple ways you can accomplish this by:

  • financing and purchasing the building you are currently leasing
  • developing and building out the current building you are in
  • buying a different or new building, or
  • purchasing land to build your office building as you see fit

With each of these options comes it’s own set of pros and cons, but  all of them can be financed through a Small Business Administration (SBA) 504 loan, through the help of  Certified Development Company (CDC) like TMC Financing. This loan program partners with conventional lenders to provide law firm owners with affordable financing to purchase real estate.

Pros and Cons of Expanding Your Legal Practice

When you are looking to hire additional staff whether they are practicing lawyers, paralegals, or administrative assistants, you will want to provide them with adequate space that tailored to their needs and competitively developed. As mentioned above, each option when it comes to expanding your legal practice comes with its own set of pros and cons. Let’s take a deeper look at them now.

  • Finance and purchase the building you are currently leasing. This can be a big step for a law firm that has been used to renting space for an extended period of time. With buildings ownership you need to consider cost to maintain the building along with insurance costs. Also, if you plan to have other tenants occupy the building in addition to your law firm staff, you will have to shoulder landlord responsibilities as well. As far as financing goes however, a 504 loan can adequately help you finance the purchase of your building while offering you competitive interest rates.
  • Develop and build out the current building you are in. Some law firms are deciding to stay in their tenured buildings. For example, the oldest law firm in the state of Illinois was facing spacing issues and considering moving out of the state. Instead of abandoning the 100-year-old building and re-establishing out West, the staff opted to stay, take out a loan, and renovate the historic building. If you currently own your own building and don’t want to leave, a great option is to renovate additional areas of your building. This can help you save on the cost of purchasing a new building and also allow you to keep your doors open as you build out your space. The good news is that you are able to utilize a 504 loan for building out, improving or upgrading your law office building.
  • Buy a different or new building. If expanding your legal practice within your current building isn’t an option, you might consider purchasing a new building. Buying a different building can allow you to upgrade in terms of space or in terms of fixtures and finishes as well. For example, if your current building was last renovated in the 1990s you could consider purchasing a smaller building that was recently renovated. Many times, newer construction offers open floor plans where you can actually add open work space and accomodate more employees. An SBA 504 loan can meet all of your relocation needs when it comes to financing as they are able to finance the purchase of a new building for your law firm.
  • Purchase land to build your office building as you see fit. Our last option is typically the most expensive, but sometimes is simply the best choice: designing and building your very own facility on land you own. If you would like to plan every square inch of your building as part of expanding your legal practice, then this option might be for you. It allows you the freedom to choose everything about your building from floor to ceiling. This can be a great way to attract new talent and clients into your law practice. Luckily, financing is available for land and new building construction through the SBA’s 504 loan program.

Consider Green Energy Program for your Legal Practice

Eglet Wall Christiansen is a top Las Vegas Law firm who worked with TMC Financing to fund the ground-up construction of their energy-efficient building in downtown Las Vegas. With the SBA Green Energy Program, they were able to receive $5.5 million on the SBA portion of their construction project. Some highlights include: electric-car charging stations, non-visible solar panels, glass skylights, HVAC airflow restrictions, a sunshade system for solar energy creation and energy efficient lighting throughout the facility.

Your expanding legal practice could qualify for the Green Energy Program if you follow these guidelines:

  • Buy or construct a building that consumes 10% less energy than your current location
  • Buy the building you now lease and make upgrades to consume 10% less energy
  • Buy or construct a building that produces 10% of the energy it consumes or produces fuel to reduce fossil fuel consumption, using equipment financed through the loan

Expanding your Legal Practice with an SBA 504 Loan

The 504 loan provides affordable financing for law firms looking to expand and encourages lending by conventional lenders (banks and credit unions) by providing them with low-risk conditions. The 504 loan program partners a nonprofit Certified Development Company (CDC) like TMC Financing with a conventional lender to provide a loan in three parts:

  • The first is a  loan from a conventional lender—a bank or a credit union—for 50% of the total project cost. The amount and conditions of that loan are determined separately, and it becomes the first mortgage. TMC can help match your law firm (the borrower) with the perfect banking partner for this loan, if requested.
  • The CDC facilitates a separate SBA loan of 35% of the total at a fixed, below-market rate. This is the second mortgage.
  • The law firm owner (the borrower) contributes 15% to the loan as down payment.

The 504 loan has a 10, 20, or 25 year term and is fully amortized (so there are no balloon payments). It is flexible enough to finance your expanding law firm, and provides opportunities for law firms to access affordable financing to expand their business.

You can find out more about 504 loan financing and the Green Energy Program from one of TMC Financing’s 504 loan experts. TMC is an SBA Premier Certified Lender and a high-volume loan provider. With over 35 years of experience, TMC can help you find the financing that is best for you and guide you through the 504 loan process. Contact TMC Financing today.

 

Barbara Morrison
Barbara Morrison
Barbara Morrison, a local small business advocate and civic leader, founded her first company TMC Financing in 1981. TMC is a Certified Development Company that provides commercial real estate financing to small business owners via the SBA 504 Loan Program. TMC consistently ranks among the top certified development companies nationwide, and has funded projects worth more than $9 billion across California and Nevada. Nearly 5,000 small businesses have benefitted from this financing, resulting in the creation of an estimated 50,000 jobs. TMC is also the No.1 SBA 504 hotel lender in the United States. Barbara is also the founder of Working Solutions, a Bay Area microlender whose mission is to provide micro entrepreneurs, particularly low-income individuals, women and minorities, with the access to capital and resources they need to start a successful business.
Barbara Morrison
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