Legal Sector: Are funders returning to specialist roots?
Ten years ago, the market was filled with funders that specialised in specific professional sectors, including the legal sector. However, as the landscape of the industry shifted, with a boom in mergers and acquisitions, these specialist funders were forced to diversify.
According to a report by the Law Society Gazette, the average size of firms increased over the last decade, and the overall number of law firms dropped by 13% over the same period, from 10,867 in 2013 to 9,498 in 2023.
This shift led former specialist funders to broaden their offer to SMEs across all professional businesses, in order to continue to survive and grow. But it appears that change is once again on the horizon and the sector could now benefit from specialist providers and products.
VAT and Tax funding, finance for professional certificates and indemnity insurance, case and disbursement funding and partner equity funding are all areas that have been absorbed into more general products over the years, but there is an opportunity now for former specialist funders to return to their roots and focus once again on targeted and industry specific products.
Traditional funders have started to pull away from partner equity funding, and the products that are available have changed significantly, from interest only loans on 10 – 15 years terms, to capital and repayment on seven-year terms, perhaps making the prospect of buying into firms less attractive than before.
Chris McLoughlin, BDM and specialist in finance for the legal sector at Bathgate, said: “Partner equity funding is just one area that could benefit from specialist focus. Are the best current products on the market the norm now, or will we see a return to interest only and longer terms with sector specific focus?
“An interest change in the market recently has been seeing a previously risk-averse and general lender launching a new term loan product specifically for the legal sector. While we don’t have all the answers right now, the team at Bathgate is looking at funders that are re-focusing or returning to a specialist focus in the legal sector, and also exploring how we can provide further specialist advice and guidance to law firms, professionals and their clients.”
Bathgate Business Finance has three decades’ experience in providing finance support to law firms at all stages of their development. Working with an extensive and trusted network of traditional and alternative funders, and through own book lending, the team can assist with:
- VAT & tax funding – spreading payments over 3,6,9 or 12 months
- Partner equity funding – to find the best products and terms on the market
- Working capital facilities – for case/disbursement funding to support growth and development
- Loans for professional certificates – break down indemnity insurance and certificate payments over 6 or 12 months
For further information about finance options for the legal sector, please contact Chris McLoughlin on 07990 012266 or email chris@bathgatebf.co.uk