Firm-side borrowing
The practice enters the facility and manages its repayment obligations. Matter recoveries may be an expected cash source, but the contract determines whether the lender has recourse to other business assets or guarantors.
Business finance for law practices
Law Firm Disbursement Funding Australia
Compare disbursement, WIP and working-capital finance for your practice, with clear costs, controls and repayment planning.
Understand the funding decision
This guide is for borrowing by a law practice. It is useful when the firm is paying third-party outlays or carrying a long gap between work, billing and collection. If an individual client will sign the loan, the legal-fee loans guide is the appropriate starting point.
Separate disbursements, WIP and working capital
These needs can appear together in a cash-flow forecast, but they are not the same asset or funding purpose. A proposal should identify precisely what is eligible. A facility approved for third-party invoices should not be assumed to cover unbilled professional time, payroll or tax obligations.
WIP means work performed but not yet billed. A debtor is an amount already invoiced but not yet collected. Neither is cash in the bank, and neither should be treated as fully recoverable without assessing the retainer, matter progress and collection risk.
| Funding need | What the cash pays for | What to clarify |
|---|---|---|
| Disbursements | Approved external costs such as experts, medical reports, counsel or filing fees. | Eligible expense categories, supporting invoices, whether reimbursement is permitted and the payee for each draw. |
| WIP | An agreed advance associated with eligible unbilled work, if the product permits it. | How work is valued, exclusions, write-downs, disputes, review dates and the consequences when expected fees are not recovered. |
| Receivables | A gap after an eligible invoice has been issued. | Which invoices qualify, collection arrangements, disputes and what happens if a debtor does not pay. |
| General working capital | Practice operating cash for approved business purposes. | Permitted uses, repayment source and whether a business loan or overdraft is a more appropriate structure. |
Be clear about who owes the money
Identify the legal entity that will borrow, the principals or others who may guarantee it and the assets offered as security. A firm facility does not automatically make each client a borrower; equally, describing finance as B2B does not establish that it is unsecured or that a principal’s property cannot be exposed.
Keep the practice’s repayment obligation separate from any amount it is entitled to recover from a client. Ask your adviser whether and how any finance charge may be passed on under the costs agreement and applicable rules. Do not assume that a practice funding cost becomes a recoverable client disbursement.
Client-side borrowing
The individual enters their own finance arrangement. The practice’s involvement in supplying documents, receiving funds or making referrals needs clear authority and role boundaries.
Sources: ASIC: National Credit Code · Victorian Legal Services Board and Commissioner: Risk Outlook 2026
Map the facility from approval to repayment
A proposed facility may use a total limit with separate matter approvals, or a different structure. Ask the provider to demonstrate one complete draw and recovery so your accounts team can see the documentation, payment and reconciliation requirements.
1. Establish available capacity
Confirm the overall limit, any eligible-asset formula, reserved capacity, matter caps and conditions before a draw. The approved limit may be higher than the amount currently available.
2. Approve the expense or matter
Record permitted purpose, matter identifier, approval authority, relevant consents and the supporting invoice or other evidence. Verify bank details independently before payment.
3. Draw and record the funds
Identify whether payment goes to a supplier, the practice or another permitted account. Record the value date, principal, fees and interest basis against the correct matter.
4. Monitor progress and exceptions
Track additional cost needs, delayed milestones, disputed invoices and changes in expected recovery. Check whether any change requires notice or affects further draw availability.
5. Reconcile repayment and release
Confirm the funds available for repayment, correct account handling, authorised payment, facility balance and any release of security. Close the matter ledger against the lender’s statement.
Compare cost, security and control together
Ask for a cost schedule using your likely draw pattern, utilisation and repayment dates. Comparing only an annual rate can hide the impact of facility, draw, review and exit charges—especially on small or short-lived advances.
| Term | Questions for the proposal |
|---|---|
| Interest basis | Fixed or variable? Charged on drawn funds, an agreed minimum or another basis? When does accrual start, and can interest be capitalised? |
| Fees | Establishment, line or unused-limit fees, each-draw charges, legal costs, review charges, minimum return, exit and default costs? |
| Repayment | Scheduled payments, receipts-based repayments, a final maturity date or a combination? What happens when the expected receipt is delayed? |
| Security and guarantees | Which assets, receivables or proceeds are covered? Are guarantees limited? What existing lender consents or priority arrangements are required? |
| Availability and review | Can further draws be suspended, a limit reduced or a renewal declined? How much notice applies and what repayment can be demanded? |
| Matter and portfolio controls | Eligible work, per-matter caps, concentration restrictions, reporting duties and triggers for additional security or repayment? |
| Recovery shortfalls | Who owes the balance if a client does not pay, a matter fails, costs are written off or a recovery is less than forecast? |
| Exit and portability | What is needed to refinance or close the facility? Are security releases, payout charges or client notices required? |
Stress-test the portfolio, not only the next invoice
Prepare a forecast that separates expected receipts from approved drawings, interest, fees and operating cash. Test delays across several matters at once, because a firm can have profitable files and still lack cash when suppliers, wages and facility obligations fall due.
Review concentration by matter, client, referral source, practice area and expected settlement month. Include write-downs and failed recoveries, not only delayed successes. New borrowing should not conceal a recurring gap between costs and reliably collected revenue.
- How much undrawn capacity is actually available after the provider’s eligibility and reserve rules?
- What remains for wages, rent, insurance and tax after facility payments?
- What happens if the largest expected receipt is delayed or does not arrive?
- Can the practice meet obligations if the provider pauses new drawings or does not renew?
- Who monitors exceptions, and when must principals reconsider further spending or new matters?
Worked example: delayed recoveries reduce room for new matters
Hypothetical principal-only illustration. Assume a $200,000 facility cap, an opening drawn balance of $120,000 and $60,000 of new approved draws. Compare receipt of $70,000 available for principal repayment with a delayed-recovery scenario in which only $30,000 is received.
| Scenario | Principal repaid | Closing drawn balance | Unused amount under the cap |
|---|---|---|---|
| Expected recoveries | $70,000 | $110,000 | $90,000 |
| Delayed recoveries | $30,000 | $150,000 | $50,000 |
Build professional obligations into the payment process
Trust money and payment flows
A facility does not give the practice permission to use client trust money for payroll or overheads. Confirm the correct treatment of each advance, invoice and repayment. Do not assume all loan funds must go to trust, or that all funds received by a practice are trust money.
Sources: Victorian Legal Services Board and Commissioner: Trust money
Confidentiality and privilege
Before sharing matter material, establish the authority, purpose and minimum information required. Consent for one purpose is not a general permission for unrelated disclosure. Consider privilege separately; sending documents to a finance provider should not be assumed to preserve it.
Independent advice and conflicts
Keep settlement advice independent of the practice’s funding pressure. Consider disclosure, referral remuneration and conflicts wherever finance creates another financial interest. The roles of lawyer, borrower, broker and lender need to remain clear.
Sources: Victorian Legal Services Board and Commissioner: Risk Outlook 2026
AML/CTF where designated services apply
AUSTRAC states that, from 1 July 2026, legal practices providing designated professional services must have an AML/CTF program in place before providing those services. Check your practice’s actual scope and current obligations; not every legal engagement is a designated service.
Sources: AUSTRAC: Legal profession program starter kit — Getting started
Prepare a useful facility pack
Practice and financial position
Entity and ownership details; financial statements and current management accounts; existing debt, security and guarantees; bank statements; and a cash-flow forecast showing the requested facility’s purpose.
Portfolio evidence
Aged WIP and debtors, disbursement balances, time from outlay to collection, recovery and write-off history, matter concentration and realistic expected draw and repayment schedules.
Controls and implementation
Authority to borrow, delegated draw approvals, reconciliation procedures, information-sharing permissions, relevant costs-disclosure processes and the proposed account and repayment flows.
Compare the facility with the alternatives
Use the same cash-flow forecast to compare a dedicated disbursement facility, a general business loan or overdraft, partner capital and changes to billing or collection practices. Relevant considerations include cost at expected utilisation, security, review risk, operating effort and whether the funds can be used for the actual need.
A matter-specific facility can provide useful discipline when its terms fit the practice. It may be unnecessarily restrictive if the real issue is general overheads, and it may be the wrong response when sustained write-offs or poor collection are driving the gap. The forecast should explain what improves and how the balance will be reduced.
Questions about this funding approach
Can one facility cover disbursements, WIP and wages?
Only if its permitted uses expressly cover those needs. Some arrangements are restricted to approved external outlays. Ask the provider to identify WIP eligibility and general working-capital permissions separately.
Do clients become borrowers under the practice facility?
Not merely because the practice uses borrowed funds for their matter. Identify the borrower in the finance contract and distinguish that debt from the client’s obligations under the retainer. Any separate client loan requires its own review.
Is a facility secured only against successful matters?
Do not assume so. Check security over business assets, proceeds or receivables, guarantees, cross-default terms and recourse if a matter fails. Security and liability depend on the specific contract.
Can the practice pass interest and finance fees to clients?
Do not assume the right to do so. Obtain advice about the costs agreement, disclosure and applicable professional rules before treating a finance cost as recoverable from a client.
Is undrawn capacity the same as money available today?
Not necessarily. Eligible matters, reserves, conditions, reporting compliance and lender approval may restrict drawings even when the headline limit has not been reached.
What happens when a matter settles later than expected?
Review continuing interest, fees, maturity, reporting requirements and any effect on further drawings. Model the effect on the whole practice and check whether extensions need separate approval.
Must finance receipts and repayments pass through trust?
The correct treatment depends on the money and transaction. Have the practice’s trust-account adviser confirm the payment flow. A lender’s preferred payment instruction does not replace professional obligations.
What should we send with an initial enquiry?
Leave your name, phone number and email to request a callback. On the call, discuss the practice, approximate amount, funding purpose and expected repayment source. Agree the next document steps before sharing client names, privileged advice or matter files.
Sources and scope
Reviewed 5 October 2026. Official sources explain the relevant consumer-credit and legal framework; they do not endorse a funding product. State-specific guidance is labelled at the source. Product availability and contract terms require separate confirmation.
- Victorian Legal Services Board and Commissioner: Trust money
- Victorian Legal Services Board and Commissioner: Disclosure where there is express or implied consent
- ASIC: National Credit Code
- Victorian Legal Services Board and Commissioner: Risk Outlook 2026
- AUSTRAC: Legal profession program starter kit — Getting started
General information for law practices, not legal, tax, accounting or personal financial advice. Facility availability, permitted use, approval, costs, security and recourse depend on the provider and contract. Obtain advice on your practice’s financial and professional obligations.
Bring the funding gap into focus
Discuss your practice’s outlays, expected collections and facility requirements with Rate Challenge. A concise business summary is enough for the first conversation.