Professional services business loans

Which loans work best for professional services firms?

A line of credit works best for the gap between doing the work and getting paid, which runs 45 to 90 days for firms that bill monthly. SBA 7(a) works best for buying another firm, buying out a retiring partner or funding a new partner's buy in, because it allows ten year terms on goodwill that no conventional lender will touch. Term loans work best for a fixed expansion like a new office.

• Lines of credit: $25,000 to $500,000 at banks, 8% to 15% APR, secured by receivables.
• SBA 7(a): $150,000 to $5 million for acquisitions and buyouts.
• Term loans: $25,000 to $1 million, 2 to 10 years.

Agencies with large clients on net 60 terms also use invoice financing.

What do lenders like and dislike about professional services?

Lenders like licensed professionals with high personal income and strong credit, recurring client relationships, retainers and engagement letters, and margins that leave room for debt. They like a firm that bills monthly and collects within 60 days.

They dislike the lack of collateral, key person risk where one rainmaker is the firm, lumpy project revenue at consultancies and agencies, and unbilled work in progress that looks like an asset but is not. They also dislike owner draws that strip all retained earnings. Contingency law firms are a special case: revenue arrives when cases settle, so most banks lend only against a track record of settlements.

How much can a professional services firm borrow?

Bank lines are typically sized at 70% to 80% of receivables under 90 days, which for a firm with $400,000 of current receivables means a line around $300,000. Online lines are sized at one to two months of deposits. SBA 7(a) acquisition and buyout loans are sized by the firm's cash flow after the buyer's salary, with lenders wanting about 1.25 times coverage, and most firm deals land between $300,000 and $3 million. Because there is no collateral, your personal credit and liquidity set the ceiling more than in other industries. See how much can I borrow for a quick estimate.

What documents will you be asked for?

Professional firms are asked for a financial package rather than an asset list:

• Two to three years of business and personal tax returns
• Year to date profit and loss and balance sheet, with owner compensation shown clearly
• Accounts receivable aging and, for banks, a work in progress report
• Client contracts, retainers or engagement letters for the largest clients
• The partnership or operating agreement and any buy sell agreement
• Professional licenses and malpractice or liability insurance
• A purchase agreement and the seller's financials for an acquisition or buyout

Online lenders usually need only bank statements. The document checklist covers the rest.

What are the common uses of funds?

Professional services loans typically pay for one of these.

• A partner buyout: an SBA 7(a) loan of $800,000 so the remaining partners can buy a retiring partner's share over ten years.
• Receivables and payroll: a $200,000 bank line drawn while a large client pays on net 60.
• Hiring ahead of revenue: see hiring and payroll, where a signed contract makes the case.
• Buying a book of business: an acquisition loan for an accounting practice sized to its recurring fees.
• Case costs at a contingency firm: a specialized line that funds expert fees until settlement.

What usually gets a professional services application declined?

The most common reasons are a personal credit score under about 650, a firm under two years old, and financial statements that show a loss after owner compensation. Lenders also decline when one client is more than a third of revenue, when receivables are mostly past 90 days, and when a buyout price is too high for the firm's cash flow once the departing partner's production leaves. Unpaid payroll taxes are a hard stop. Firms that run through a personal account are declined because revenue cannot be verified. The fixes are in why loans get denied.

How to apply

Apply once here with your financial statements, receivables aging and tax returns, and your application reaches bank, SBA, online line and invoice financing lenders together. Or connect your AI assistant to our MCP server through the agents hub and let it read your financials, fill the application and submit it. It is free to the firm, and offers come back to the same place for comparison.