Professional fee funding for law, accountancy and consultancy firms

Professional fee funding works by paying a large, known cost on your firm's behalf and letting the firm repay it in monthly instalments. Because the costs are predictable, the process is usually simpler than a general business loan.

1. Plan around known dates: VAT quarters, tax payment dates and insurance renewals arrive on a schedule, so a good time to arrange funding is a few weeks before they fall due.
2. Assessment: the lender reviews your accounts, fee income, bank statements and the credit history of the firm and its principals.
3. Offer and documents: the lender sets out the amount, term, monthly payment and any guarantees required. Members, partners or directors sign where needed.
4. Payment: the lender pays the bill, often directly to HMRC, the insurer or the insurance broker.
5. Repayment: your firm repays by direct debit, usually in equal monthly instalments, and many lenders will consider repeat funding for the next bill.

Our professional services sector page covers the broader finance needs of firms in this market.

Most professional fee funding falls into four groups: VAT and tax, insurance premiums, partner capital, and general practice funding. Firms often use more than one over a year.

VAT and tax funding

VAT funding spreads a quarterly VAT bill over the months before the next one, and tax funding does the same for corporation tax. For LLPs and partnerships, members and partners pay income tax personally, and many firms hold back part of profit shares to cover it. Firm-level funding can help when those reserves are stretched. See our pages on VAT loans and tax bill loans for more detail.

Professional indemnity insurance premium funding

Many professional bodies require practising firms to hold professional indemnity insurance, and the premium is often a large annual cost. Premium funding spreads it over monthly payments. If payments are missed, the lender may be able to cancel the policy, which could leave the firm unable to practise, so this needs careful planning.

Partner capital and succession funding

When a partner or member retires, the firm may need to repay their capital account in a lump sum. A loan to the firm can spread that cost. We arrange finance for the firm itself, not personal loans to individual partners or members. Our guide to finance for LLPs and larger partnerships explains how lenders approach these structures.

Practice funding against fees and work in progress

Some lenders offer longer-term practice loans sized on fee income, and some will consider billed fees or work in progress. Lenders are usually cautious about unbilled work and conditional or contingent fees, because they are harder to value and collect.

The cost of professional fee funding depends mainly on the term, the amount and the lender's view of your firm. Short-term funding for bills is often priced as a fixed charge, while longer loans carry interest.

• Fixed funding charge: common on VAT, tax and premium funding, added to the amount borrowed and spread across the instalments.
• Interest: used on longer practice loans, fixed or variable depending on the lender.
• Arrangement fee: some lenders charge a set-up fee, either paid upfront or added to the loan.
• Late payment and default charges: apply if an instalment is missed.
• Early settlement terms: some agreements allow early repayment with a reduced charge, others do not.

Lenders usually look at profitability, the stability of fee income, how much of it depends on a few clients, existing borrowing and credit history. Compare the total amount repayable with the cost of paying late or the cost of drawing on other funds. For tax, HMRC charges late payment interest at the Bank of England base rate plus 4%, and HMRC Time to Pay arrangements may be an option for some firms.

Illustrative example only: actual costs depend on the lender and your circumstances.

Imagine an accountancy LLP faces a professional indemnity insurance renewal of £60,000. Rather than pay it in one go, it arranges premium funding over 10 months.

• Amount funded: £60,000
• Fixed funding charge: £3,000
• Total repayable: £63,000
• Monthly payment over 10 months: £6,300

The firm pays £3,000 more in total, but keeps £60,000 of cash available at renewal time. Whether that is worth it depends on what the firm would otherwise do with the cash, and whether the same months also bring VAT or tax payments.

Through our panel, professional fee funding typically ranges from around £10,000 to £500,000, depending on the firm's size and the purpose. Funding for a specific bill is usually sized on the bill itself.

For longer practice loans, lenders typically look at annual fee income, profit, existing commitments and how comfortably the firm can meet monthly repayments. Some lenders limit funding to a share of annual fees or set a maximum relative to profit. Larger firms with long track records and diverse client bases are usually able to borrow more.

Professional fee funding is usually straightforward, but the commitments can be significant for the people behind the firm. Check these points before you sign.

• Personal guarantees: members, partners or directors are often asked to guarantee the borrowing. Our guide on personal guarantees explains what this means.
• Joint liability: guarantees from several people may be joint and several, so each person could be liable for the full amount.
• Changes in membership: check what happens to guarantees and the loan if a guarantor leaves the firm.
• Policy cancellation: for insurance premium funding, missed payments may lead to the policy being cancelled.
• Repeat borrowing: rolling one bill's funding into the next can build up costs. Plan to reduce reliance over time.
• Early repayment: check whether you can settle early and what it costs.

Professional fee funding suits firms with large, predictable bills and steady fee income. Other options can be better in some situations.

• Tax bill loans are the same idea for companies outside professional services, and may suit a one-off tax bill.
• A revolving credit facility can suit firms that want a standing line to draw on for several bills during the year.
• Invoice finance may suit consultancies that bill business clients on credit terms, although lenders are often cautious with law firms' fee structures.
• HMRC Time to Pay may be available for tax that cannot be paid on time, and your firm can ask HMRC about it directly.

Sometimes, but it depends on the lender. Because lenders rely on fee income and the people behind the firm, adverse credit for the firm or its principals usually makes approval harder and terms more costly.

Lenders set their own minimum trading periods, from a few months to two or three years, and many prefer to see at least one set of full accounts. A newly formed LLP that has taken over an established practice may be viewed differently from a brand new firm, depending on the lender. Low or falling profits may still be considered for short-term bill funding if cash flow can clearly cover the repayments.

Professional fee funding for limited companies, LLPs and partnerships of four or more partners is generally unregulated business lending. The protections of the Consumer Credit Act generally do not apply to lending to these businesses.

That means the agreement itself sets out your rights, so read it carefully and consider independent legal or accountancy advice, particularly on guarantees. Welcome Finance is not authorised or regulated by the FCA and arranges unregulated business finance only. Your firm's own professional rules, for example on client money, still apply: this funding is for the firm's own business finances. Our guide on regulated vs unregulated business finance explains more.

We help your firm plan funding around its key dates and introduce it to suitable lenders on our panel. Every client has a dedicated relationship manager, a real person you can reach by phone, email and chat, from first enquiry until the lender pays out.

1. Check eligibility in about 60 seconds without affecting your credit score.
2. Talk through your calendar: VAT quarters, tax dates, insurance renewals and any partner changes.
3. Match to lenders on our panel that fund professional practices.
4. Apply: lenders run their own credit checks once you decide to go ahead.
5. Compare and complete: we help you understand offers, guarantees and total cost before you sign.

We do not charge you a fee. We are paid a commission by the lender when your finance completes, and you can ask how much we will receive. Commission can differ between lenders.

Can we fund VAT and insurance premiums with the same lender?

Some lenders offer both. Others specialise in one, so you may end up with separate agreements.

Can we arrange funding before the bill arrives?

Often, yes. Many firms arrange funding a few weeks before a VAT quarter or renewal date, using the expected figure or the renewal quote.

Does professional fee funding suit consultancies set up as limited companies?

Yes, provided the company meets the lender's criteria. Lenders look at fee income, client spread and accounts in the same way.

Can a firm have more than one funding agreement at once?

Often, yes, but each lender will look at total commitments and whether the firm can afford all of them.

Will funding a tax bill affect our relationship with HMRC?

Paying on time avoids HMRC late payment interest and penalties. The funding agreement is with the lender, not HMRC.

What happens if a guarantor partner retires?

It depends on the agreement. Some lenders will release or replace a guarantee, others keep it until the loan is repaid.

Can funding cover a merger or the purchase of another practice?

Buying another firm is usually treated as acquisition finance, which involves a fuller assessment than bill funding.

How quickly can funds be released?

For simple bill funding, lenders often decide within days of receiving complete documents. Longer practice loans take more time.