If you’re in the process of starting a law firm, one of your main concerns is likely how much it will cost. There are many variables that factor into the actual cost to begin your own practice, not to mention how you will fund the whole endeavor. Some attorneys are able to create a firm on a shoestring budget. However, if you are planning on starting big, your initial costs may be more significant.
Here are some things to consider when it comes to law firm start-up costs.
How much does it cost to start a law firm?
It’s impossible to pinpoint exactly how much it will cost you to hang a shingle. However, there are some ballpark considerations that can help you understand your initial budget. Some people are able to start a law firm with a couple thousand dollars. Others need $30,000 or more to begin practice. The exact amount you need depends on your overhead costs and the budget you decide on for items you will need. To determine this amount, consider the following.
Location
Will you have a physical law office or a virtual workplace? If you, like many new attorneys, decide to work from home, you can easily rent a workspace or conference room when you need to meet with clients. On the other hand, having an office space may be important to you. Rent for a physical business location can range dramatically depending on where you are located. If you rent a traditional office space, you may pay $1,000 or more monthly, while renting conference space only when it is needed might cost $200 or less.
Supplies and office equipment
Even if you opt to work from home, you will need certain supplies and office equipment. It’s important to have high-quality printers, scanners, phones, and copiers. For high-quality equipment leases expect to pay $1000/month. You will also need plenty of paper, stamps, pens, note pads, envelopes, and more. These items can add up. However, they shouldn’t amount to more than a couple of hundred dollars per month.
Computer hardware and software
Computer hardware and software will be one of your highest costs when starting a law firm. You will need a quality laptop computer, as well as case management software and document and PDF processing software. These are generally one-time or annual costs, with hardware costing thousands of dollars and software hundreds.
Most legal research databases and data storage in cloud services are subscription-based. You can lower your costs by joining the American Bar Association or your state bar association with free legal research databases. Data storage in cloud services like Dropbox are necessary to ensure your information is secure and you don’t lose valuable files if your hardware malfunctions. These overhead costs may amount to $100 per month or less.
Professional expenses and training
You will need to set aside a budget for professional expenses and training, including licenses, continuing education, conferences, and events. Most states charge companies to obtain a business license, and you will have to pay to maintain your active status as an attorney with the state bar association.
Continuing education is a requirement of all attorneys. While conferences and events are sometimes negotiable expenses, they should be heavily considered to maintain networking and positive appearance. These costs can amount to hundreds or thousands of dollars, depending on the details of the training and events.
Insurance
All businesses need insurance, especially law firms. The types of insurance you need depend on the state you’re in, your practice areas, whether or not you have employees, and other factors. The cost of all these insurance types can vary also, but usually amount to $1,000 or less monthly total.
At a minimum, you should have:
General liability insurance
Property insurance
Malpractice insurance
Workers’ compensation insurance
Cybersecurity Insurance
It’s best to consult with a professional business advisor in your state to ensure you get the right insurance for your new law firm.
New law firm marketing
You will need to invest in marketing for your law firm. However, the amount you decide to put into building a website, social media, Google ads, and other advertising methods depends heavily on your goals. For example, if your target audience does not use social media often, then you can avoid spending money on developing a heavy Facebook presence.
However, one thing you should not skimp on is the quality of your website. And you can achieve a professional site at a low cost or at significant expense. The choice is yours. Many low-cost template options allow you to build your own website. But if you really want to take advantage of SEO tools and rank at the top of Google, you may need to invest in a marketing agency. Many legal marketing agencies offer packages to new law firms for $2,000 to $5,000 monthly to create a website, juggle advertising, and track performance.
Taxes
Every business must pay state and federal taxes. However, the amount you pay will depend on the type of business you form and your annual earnings. It will cost up to $1,000 to have a tax professional keep track of your revenue and expenses and help you complete and file your taxes when the time comes.
Get the funds to start your own law firm
If you are ready to start your own law firm, you should consider all of the costs. Once you create a budget and know how much you need, complete a quick application on Lendio to receive and compare multiple law firm funding offers. Learn more about law firm financing options.
Many newly minted lawyers dream of one day hanging their own shingles. You may be ready to start your own law firm, but unsure of where to begin. Many lawyers, when they first start out, will work out of their home, use their personal cell phone and obtain liability insurance and a simple case management system. This post will explore the steps beyond that if your dream is to build and expand a practice.
Create a business plan
How to create a law firm business plan
One of the first steps in starting a law firm is to create a business plan. This is a document that summarizes your goals and details about operations. It serves as a basis for creating the firm, as well as a roadmap for the future.
Here are some key elements to include in a law firm business plan:
Executive summary stating what your company is
Firm description
Goals and a discussion of how your firm will be successful
Market analysis
Organization of members and management overview
Services offered and practice areas
Marketing strategy and sales goals
Financial plan, including funding needs and fee structure
Financial projections and start-up budget
Budget and financing
Creating a budget and financing a new law firm
Another essential part of starting any new business is figuring out the financial details. When you begin thinking about your new law firm, you need to have a solid understanding of how much it will cost to begin operations and how to get the money you need.
Your initial budget should include everything from startup costs to necessary purchases of hardware and software, including personal computers and case management software. Long-term budgeting should consider:
Recurring subscriptions
Annual bar dues
Personal liability insurance premiums
Law firm marketing costs
Malpractice insurance premiums
Workers’ compensation insurance costs
Unemployment insurance costs
Other expenses for employee benefits
It is possible to start a firm with less than $5,000 in the bank; however, these small businesses often need other financing options down the road. That’s where Lendio comes in. Lendio offers new law firms financing options with a single 15-minute application.
Technology and services
Legal technology and services you may need
The legal industry utilizes a plethora of legal technology and tools that can help lawyers operate a successful practice. While many of these services are not required to practice law, they can make your operation much more efficient, saving time for your staff and money for your clients.
Basic hardware new law firms need
You will need several pieces of hardware to communicate with other attorneys, clients, and courts. Some of the basic hardware you need include:
Computers (preferably laptops)
Printers
Scanners
Phones
You can easily create a paperless law firm wherein you don’t need physical filing cabinets, but that will require additional software and data storage systems.
Software new law firms need
There is an array of innovative software for law firms on the market. These programs benefit attorneys, staff, and clients by making work easier and helping everyone stay organized. Some important software you’ll want to consider for your new law firm include:
Legal practice management system (LPMS)/Case management software
Word processing software (such as Microsoft Word or Google Docs)
PDF readers and editing software (such as Adobe Acrobat)
Interoffice communications (such as Slack or Google Hangouts)
Email software (such as Google or Yahoo)
Office calendaring software
Client relationship management software (CRM)
Data threat security tools (such as Webroot or Norton)
Data or cloud storage
You will need a place to store client documents and other firm information, so that it can be easily accessed by key stakeholders. The most convenient method is to utilize cloud storage through a service like Dropbox.
This storage system can be customized to allow internal or external users to access, upload, and download documents, pictures, and other data. Since the storage is available online, you can have access to it from anywhere, whether you are in the office or about to head to court.
Phone systems
All law firms need to have a phone system, so that clients can easily reach them. While you might be inclined to use your current phone, that will quickly become overwhelming when you gain dozens (or hundreds) of clients. As you’re practice grows it will be helptful to have a dedicated phone line solely for law firm use.
You should also consider using a virtual receptionist who can answer the phones when you are unavailable. This will ensure your clients and potential clients always receive great customer service.
Marketing
New law firm marketing
Legal marketing can feel overwhelming. There are a lot of moving parts, from creating a website to pay per click (PPC) advertising on Google and other platforms. While some firms spend tens of thousands on law firm marketing, that’s not necessary when you’re just beginning your firm. You should create a marketing plan that considers your clients’ needs and how you can meet them in the most efficient way possible.
Branding your new law firm
Branding is one of the most essential parts of new law firm marketing. You want to use effective branding to connect with your clients and put your best foot forward. Develop a logo, slogan, and tone of voice that match your style. Your brand should be presented on everything that you create, from your website to your business cards.
Creating a website
Law firms need to have an online presence. However, it doesn’t have to cost five figures to create a website. If you have time, you can create your own website with templates available online. You may outsource content and SEO (search engine optimization) services to reduce costs and still get good copy. However, there are legal marketing agencies out there who will develop law firm websites for reasonable prices.
Other considerations for running a new law firm
In addition to starting your new law firm, you will have to run it on a day-to-day basis. To do this, you should consider:
Organizational charts, including accountabilities of staff
The American Dream, once the ethos of the United States, offering the highest aspirations and equal opportunities for a comfortable life, has changed. What is the American Dream in 2023, and is the American dream still attainable?
A recent Lendio survey of more than 350 small- and medium-sized business owners across the U.S. found that, while 49% of small business owners believe it is somewhat or much harder to own a small business than it was in the past, 89% still believe it’s possible to reach that goal.
American dream definition.
How small business owners define the American dream.
The original definition of the “American Dream” was based on the prospect of equality, justice, and democracy. Evolving into the belief that anyone can become what they strive to be—the opportunity for upward mobility, economic success, and attaining the life one has always dreamed would be fulfilling.
As times have changed, so has the idea behind the dream. While traditional components, such as homeownership (46%) and starting a business (34%), are still identified as important by small business owners, 67% identify freedom to live how you want as the primary component of the American Dream.
What does achieving the American dream mean to you? (Select all that apply)
Response percent
Education and a job
40.48%
Homeownership
46.83%
Freedom to live how you want
66.67%
Starting your own business
34.66%
Becoming wealthy
30.69%
Having children
21.16%
Retirement
37.30%
Based on a 2023 Lendio survey
American dream challenges.
Small business owners remain optimistic but see growing challenges.
Starting a business is a significant step in obtaining the American Dream, and entrepreneurs can face many challenges. There’s no one solution for all businesses. But making a plan and accessing tools make it easier in today’s environment, where small business owners are one click away from equipping themselves in advance. Some of the biggest obstacles to tackle for small business owners include the following:
Funding a business
Finding and keeping customers
Finding and keeping good employees
According to the survey, small business owners primarily face challenges related to the economy (23%), inflation (21%) and other financial concerns (14%). Hiring remains a primary challenge for 11% of small business owners. 56% of small business owners state that large corporations, such as Amazon and Google, have a negative impact on growth opportunities for their business.
Generational Differences
Generational differences
Millennials are a highly entrepreneurial group of business owners, with ages ranging from 27 to 42. In this high-rate environment with rising costs, layoffs, and the Great Resignation, we’ve seen a surge in startups. And according to Bloomberg, “creating successful companies is a young person’s game.”
But being an entrepreneur is not just for the young at heart, it’s the American Dream for people of all ages, with 31% of respondents aged 45+ stating that starting a business is part of achieving the American dream. Perhaps unsurprisingly, those owners 45 and above place greater importance on retirement (46%), while those under 45 place more importance on becoming wealthy (36%) as part of the American dream.
At a certain age, the American Dream can seem easy to give up on or unattainable. The analysis finds a clear correlation between age and sentiment among small business owners. Those over 45 are more pessimistic, seeing the American Dream as more challenging to attain in the current environment. In contrast, those under 45 find it slightly easier to achieve. But entrepreneurship is a reality for both the young and old, with 89% of those age 45+ still believing owning a small business is attainable.
The two generations also fund their businesses differently. While both generations rely heavily on personal funds to start their businesses, those under the age of 45 have started to turn to alternative sources as well, such as crowdfunding (6%) and online lenders (5%).
Access to funding.
Access to funding is key for small businesses.
Access to capital and lower expenses are the key factors for creating an environment where entrepreneurs can start a business.
66% of small business owners state having a financial safety net would have had the most impact on their ability to start a business, followed by access to capital at 53%.
Of the respondents, 52% state that living in an area with lower business costs and a lower cost of living would be helpful. 44% state lower taxes would have an impact.
54% of SMB owners started their business with personal funds with another 12% relying on friends and family.
79% of SMB owners needed less than $100,000 to start their business with 43% needing less than $10,000.
Although 49% of respondents believe it’s somewhat or much harder today than in the past to achieve the dream of owning a small business, online loan marketplaces are making it much easier. Lendio is committed to helping entrepreneurs find the right small business loans for their small businesses, so they feel supported and optimistic in achieving their piece of the American Dream.
*Disclaimer: The information, methodologies, data and opinions contained or reflected in Lendio’s Small Business Owner Pulse Survey (the “Survey”) are proprietary of Lendio and is intended for informational purposes only. The Survey does not constitute business or legal advice, and is not a substitute for professional advice. The recommendations provided by Lendio are general industry recommendations, and are not a substitute for your business judgment. The Survey is based on responses to a survey provided by Lendio, but the opinions of those businesses may change over time. Thus, the Survey is not warranted as to its merchantability, completeness, accuracy or fitness for a particular purpose. The Survey is provided “as is” and reflects Lendio’s opinion at the date of their elaboration and publication. Lendio does not accept any liability for damage arising from the use of the Survey in any manner whatsoever. While every effort has been made to ensure that this Survey and the sources of information used herein are free of error, Lendio is not liable for the accuracy, currency and reliability of any information provided in the Survey.
Financing your business with an SBA loan can help you invest in the things you need to grow your revenue. However, in addition to your financial documents and business plan, some SBA loans come with insurance requirements. When your loan terms come with collateral obligations, that property also needs to be covered with a hazard insurance policy.
Here's what to know about hazard insurance and when you need it.
Hazard Insurance Explained
Hazard insurance is a type of business property insurance that covers damage caused by accidents or natural disasters. Your insurance policy will outline "covered events." These are the types of events that may occur and cause damage. When that happens, your hazard insurance kicks in and covers the damage (within the limits of your policy).
Most hazard insurance policies include the following covered events:
Theft
Vandalism
Fire damage
Some water damage (caused by things like burst pipes, but not natural flooding)
Storm damage
In addition to covering the building itself, hazard insurance also covers the property inside. This includes any damage caused to:
Furniture
Equipment
Inventory
Tools
Limitations Of Hazard Insurance
Hazard insurance policies don't give your business an automatic blank check when a covered event occurs. Each policy comes with a coverage limit for both the building and the property within. So it's important to get a policy large enough to cover a worst-case scenario, such as a total loss.
Your hazard insurance policy will also come with a deductible—the amount you're responsible to pay before your coverage kicks in.
SBA Hazard Insurance Requirements
The SBA hazard insurance requirement applies to property that is used as collateral. Most SBA loans, including 7(a) and 504 loans, require some type of collateral in order to be approved.
Because it's used as collateral, the property must be properly insured. That way, if there's any damage done that's out of your control, the building can be repaired or replaced and still maintain its value.
Here's the breakdown on hazard insurance requirements for each type of SBA loan:
SBA 7(a) loans - Hazard insurance is required for loans of $25,000 or more.
SBA 504 loans - Usually the property being renovated or purchased is used as collateral.
Microloans - Hazard insurance is not required, but flood insurance might be.
Economic Injury Disaster Loans (EIDL) - Hazard insurance is required for loans of $25,000 or more.
Types Of Business Property Insurance
Not all insurance companies refer to property insurance as hazard insurance. Instead, they may call it commercial property insurance. Here are some options to explore as you look for coverage required by the SBA.
Commercial Property Insurance
Commercial property insurance is the same thing as hazard insurance. Any covered events provide reimbursement for building repairs, as well as damaged items within the building. With this type of insurance, you would need to file a claim for your business. Then an insurance adjuster would assess the damage and provide you with reimbursement accordingly.
Flood Insurance
Anytime your commercial property is located in a flood zone and used as SBA loan collateral, you'll need a flood insurance policy as well. That's because damage caused by flooding is not typically included in most hazard or property insurance policies.
To see if you need flood insurance, first visit FEMA’s online flood map tool to see if your property's address is located in a flood zone and then check your need for insurance when you apply for an SBA loan. If you do, you will need to pay an extra premium, but it will be worth the investment, if you're in an area at risk of flooding.
How To Get Business Hazard Insurance For An SBA Loan
If your commercial property isn't properly insured, you'll need to purchase a hazard policy as part of your SBA loan funding process.
Follow these steps to ensure you're in compliance with your loan terms:
Choose a licensed insurance agent -Even though licensed insurance agents typically receive a commission on your purchase, they are best equipped to help you find the right business coverage for your needs. Specifically seek out one who is experienced in meeting SBA loan requirements.
Compare policies - With the help of your insurance agent, compare the terms of all of your hazard insurance policy offers. Compare premium costs and coverage to make sure you get the right balance between the two.
Name your lender as the loss payee - It's standard practice to name the SBA, your lender, or CDC as the loss payee on your hazard insurance policy. They have a vested interest in ensuring the property is repaired or replaced. In some instances, they may monitor how the insurance funds are used.
Maintain your hazard insurance policy - Keep up with your insurance premiums to stay in compliance with your SBA loan terms. You cannot cancel or reduce the insurance policy unless there is some justification that the insured assets have been reduced or depreciated.
Getting proper hazard insurance is just one step in obtaining an SBA loan. Lendio's team of experts can help you throughout the entire process. Apply for an SBA loan now!
We surveyed 350+ small business owners across the U.S. Here’s what they had to say.
KEY STATS
49% of small business owners believe it’s somewhat or much harder to achieve the dream of owning a small business than in the past.
Those under the age of 45 skew slightly more optimistic with 46% stating owning a small business is slightly or much easier to achieve.
Those over 45 skews more pessimistic; 58% believe it is slightly or much more difficult to reach that dream.
Small business owners are primarily facing challenges related to the economy (23%), inflation (21%) and other financial concerns (14%).
66% of small business owners state having a financial safety net would have had the most impact on their ability to start a business, followed by access to capital at 53%.
54% of SMB owners started their business with personal funds with another 12% relying on friends and family.
79% of SMB owners needed less than $100,000 to start their business with 43% needing less than $10,000.
A small business has been in business about three years (a median of 40 months) when it is first funded by an outside lender and receives a median amount of $47,000.
56% of small businesses state that large corporations have a negative impact on growth opportunities for their business.
Executive Summary
Lendio surveyed more than 350 small-and medium-sized business owners across the U.S. to gather insights about their ability to start and run a small business. The survey included measures of business owners’ most significant challenges, access to capital, impacts on growth, and their ultimate goals for starting a small business.
The analysis finds a clear correlation between small business owners’ age and sentiment. Those over 45 are more pessimistic, seeing starting a business as more challenging to attain in the current environment. In contrast, those under 45 find it slightly easier to achieve.
Inflation, economic distress, and labor force were the biggest challenges small business owners cite.
When asked how respondents funded their small businesses, 54% indicated personal funds, followed by bank loans. This survey, along with demographic indicators, can help identify and illuminate the experiences of current and future business owners spanning the different regions of the U.S. Overwhelmingly, responses have consistently shown that access to funding can make or break a company.
“With every business success story comes the ability to have an impact on your community—a ripple effect. 2022 was a challenging year. As we think about the coming year, we’re in your corner, we’re excited to cheer you on, and to help you overcome some of the business challenges you’re facing. We’re optimistic for 2023. We look forward to working with you to get you access to the capital you need to grow your business best.”
Although 49% of respondents believe it’s somewhat or much harder to achieve the dream of owning a small business today than in the past, online loan marketplaces are making it much easier. Lendio is committed to helping entrepreneurs find the best funding options for their small businesses, so they feel supported and optimistic about starting their small businesses.
Key Recommendations*
Based on survey results, we recommend the following to support small business owners:
Loan Access - The rise of online lenders and lending marketplaces has increased access to small business loans, but there is still work to be done to improve small business’s access to funding through automationand faster approvals.
Target Underserved Areas - Lenders should target underserved areas where respondents believe starting a business is less attainable. Those areas tend to also feel greater negative impacts caused by inflation, increasing costs, and economic strains.
Educational Resources - Empowering small business owners through education and resources within their communities can be a major benefit to getting businesses off the ground.
Small Businesses Owners Face Challenges But Remain Optimistic
KEY STATS
49% of small business owners believe it’s somewhat or much harder to achieve the dream of owning a small business than in the past. 33% of SMB owners believe it is somewhat or much easier. 19% say it's about the same.
89% of small business owners believe it’s possible to attain the goal of owning your own business.
While 49% of small business owners believe it is somewhat or much harder to own a small business than it was in the past, 89% still believe it’s possible to reach that goal.
Entrepreneurs can face many challenges when starting a small business. There’s no one solution for all businesses. But making a plan, and accessing tools make it easier in today’s environment where small business owners are one-click-away from equipping themselves in advance. Some of the biggest obstacles to tackle for small business owners include the following:
Funding a business
Finding and keeping customers
Finding and keeping good employees
The Economy’s Effects On Small Businesses
KEY STATS
Small business owners are primarily facing challenges related to the economy (23%), inflation (21%) and other financial concerns (14%).
Hiring remains a primary challenge for 11% of small business owners.
56% of small business state that large corporations have a negative impact on growth opportunities for their business.
The economy is experiencing a slowdown, and the Federal Reserve continues to increase interest rates to tame inflation. Business owners are feeling the effects. In a recent World Economic Forum poll, nearly two-thirds of the economists believe there will be a 2023 recession.
The post-pandemic environment has created many challenges, and small business owners still feel the ripple effects of COVID-19 protocols coupled with inflation. With inflation still at a 40-year high, we asked small business owners about their current biggest challenges.
Small business owners are primarily facing challenges related to the economy, inflation and other financial concerns. Challenges related to Covid recovery and supply chain issues are less of an issue.
Creating An Environment Where Small Businesses Can Thrive
Location, taxes, and socioeconomic factors help to evaluate the best environment for a business which is why we asked respondents to select three choices that most affected their ability to start a business.
Access to capital and lower expenses are the key factors for creating an environment where entrepreneurs can start a business.
KEY STATS
66% of small business owners state having a financial safety net would have had the most impact on their ability to start a business, followed by access to capital at 53%.
Of the respondents, 52% state that living in an area with lower business costs and a lower cost of living would be helpful. 44% state lower taxes would have an impact.
Funding Stats
Start-up funding for a small business can come from one or multiple resources. One of the most common ways entrepreneurs fund their businesses is through savings or friends and family. Alternatively, an infusion of cash from a small business loan may be the way to go. With no shortage of financing options, we asked survey participants how they first funded their businesses.
KEY STATS
54% of SMB owners started their business with personal funds with another 12% relying on friends and family.
79% of SMB owners needed less than $100,000 to start their business with 43% needing less than $10,000.
The average loan amount for a small business owner is $47,000.*
A small business has a median of five employees when it is first funded by an outside lender.*
A small business has been in business for about three years (a median of 40 months) when it is first funded by an outside lender.*
*Based on internal Lendio data of 300,000+ loans funded since 2013.
How Small Business Owners Define The American Dream
The original definition of the “American Dream” was based on the prospect of equality, justice, and democracy. As times have changed, so has the idea behind the dream.
The definition for most small business owners is relatively fluid. While traditional components, such as homeownership (46%) and starting a business (34%), are still identified as important, 67% identify freedom to live how you want to be the primary component of the American Dream.
Generational Differences
KEY STATS
Those under the age of 45 report needing more money to start their business with 23% needing $100K-$250K while only 10% of those aged 45+ needed that amount.
While both generations rely heavily on personal funds to start their businesses, those under the age of 45 have started to turn to alternative sources as well such as crowdfunding (6%) and online lenders (5%).
Millennials are a highly entrepreneurial group of business owners, with ages ranging from 27 to 42. In an environment with rising costs, layoffs, and the Great Resignation, we’ve seen a surge in startups. And according to Bloomberg, “creating successful companies is a young person’s game.”
But being an entrepreneur is not just for the young at heart; it’s a dream for people of all ages, and where economic downturns have historically driven growth, the generations looking to start anew fund their businesses differently.
At a certain age, owning a business can seem easy to give up on or unattainable. But entrepreneurship is a reality for both the young and old. The survey showed a distinct difference in sentiment between younger and older business owners, with older business owners feeling more pessimistic and younger business owners feeling more optimistic.
KEY STATS
46% of younger business owners (18-44) believe owning a small business is somewhat or much easier to achieve.
58% of older business owners (45+) believe owning a small business is somewhat or much harder to achieve.
Despite differing perceptions of challenges both generations agree it’s possible to attain the goal of owning your own business.
The survey also found generational differences in what helps or hinders a small business’s success and what those business owners value most in their life.
While a large majority (71%) of SMB owners aged 18-44 believe large corporations have a negative impact on growth opportunities for their business, 57% of those 45 and above disagree, stating large corporations don’t have a negative impact on their business.
While the generations agree that a financial safety net, access to capital and low costs are most critical to success, those 44 and younger place greater importance on access to educational resources and see cultural bias as a larger inhibitor.
Both generations agree that the freedom to live how you want is the most important component of the American dream. Perhaps unsurprisingly, those 45+ place greater importance on retirement (46%) while those under 45 place more importance on becoming wealthy (36%).
Gender Differences
The survey found relatively few differences between genders other than the amount of funding needed to first start the business.
A significantly greater number of women (49%) needed less than $10,000 to start their business than men (36%).
A significantly greater number of men (21%) needed $100K-$250K to start their business than women (12%).
Geographic Differences
There were few significant differences across regions.
The Middle Atlantic region (New York, New Jersey, Pennsylvania) had the most positive sentiment toward being able to start a business with 96% of respondents believing it’s possible.
The East South Central region (Kentucky, Tennessee, Alabama, Mississippi) had the most negative sentiment, with 30% of respondents stating they didn’t believe it was possible to attain the goal of owning your own business.
*Disclaimer: The information, methodologies, data and opinions contained or reflected in Lendio’s Small Business Owner Pulse Survey (the “Survey”) are proprietary of Lendio and is intended for informational purposes only. The Survey does not constitute business or legal advice, and is not a substitute for professional advice. The recommendations provided by Lendio are general industry recommendations, and are not a substitute for your business judgment. The Survey is based on responses to a survey provided by Lendio, but the opinions of those businesses may change over time. Thus, the Survey is not warranted as to its merchantability, completeness, accuracy or fitness for a particular purpose. The Survey is provided “as is” and reflects Lendio’s opinion at the date of their elaboration and publication. Lendio does not accept any liability for damage arising from the use of the Survey in any manner whatsoever. While every effort has been made to ensure that this Survey and the sources of information used herein are free of error, Lendio is not liable for the accuracy, currency and reliability of any information provided in the Survey.
The U.S. Small Business Administration (SBA) offers a variety of attractive loans to small businesses in the U.S. SBA Express loans are one popular loan option you might want to consider if you need no more than $500,000 in funding. Just like other SBA loans, Express loans offer low interest rates and flexible repayment terms that you may not find elsewhere.
Compared to other SBA loans, however, these financing solutions come with much easier applications and faster approval times. Let’s take a closer look at what SBA Express loans are and how they work, so you can decide if they make sense for your unique situation.
What is an SBA Express loan?
An SBA Express loan is part of the SBA 7(a) loan program, which is the most popular SBA funding option. Upon approval from an SBA-approved lender, you can use the funds for a wide variety of business-related expenses, such as commercial real estate, equipment, working capital, debt refinancing, or business expansion.
You can choose from the standard Express loan or Export Express loan and lock in up to $500,000 in funding. While repayment terms depend on loan type and purpose, they go up to seven years for lines of credit, 25 years for real estate loans, and five to 10 years for other loans.
The lender, loan size, and your financial situation will dictate the interest rate you may receive, but SBA Express loans cap out at the prime rate plus 6.5% for loans of $50,000 or less and the prime rate plus 4.5% for loans greater than $50,000. The chart below outlines the key components of these loans.
Types of loans
Standard SBA Express loans, SBA Export Express loans
Maximum SBA guarantee
50%-90% depending on loan type
Loan amount
Up to $500,000
Repayment terms
Up to 10 years for working capital, equipment, and inventory purchases, up to 25 years for real estate, and up to seven years for lines of credit
Interest rates
The prime rate plus 6.5% for loans of $50,000 or less and the prime rate plus 4.5% for loans greater than $50,000
Down payments
Not required. Determined by the lender.
Collateral
Required for loans greater than $50,000
Fees
One-time guarantee fee based on the size of the loan, which can be waived for veteran-owned businesses, and potential lender fees for servicing
Funding times
Depends on the lender, but the SBA will make a decision on standard Express loan applications within 36 hours and Export Express loans within 24 hours
Types of SBA Express loans.
There are two types of SBA Express loans, including standard Express loans and Export Express loans. Let’s dive deeper into the details of each one.
Standard SBA Express loans.
Standard SBA Express loans are designed for qualifying small businesses that operate in the U.S. or the U.S. territories. The SBA responds to applications for these types of loans within 36 hours. With a standard SBA Express loan, you can borrow up to $500,000 and enjoy an SBA guarantee of 50%. While interest rates max out at the prime rate plus 4.5%, they ultimately depend on your qualifications, lender, and loan amount.
SBA Export Express loans.
SBA Export Express loans differ from standard SBA Express loans in that they’re geared toward exporters. If you’re in search of funding to support export activities for your business, this option is worth exploring. The SBA will guarantee 75% of loans that are larger than $350,000 and 90% of loans that are less than $350,000. Approval times are also shortened as the SBA will respond to applications in no more than 24 hours.
How SBA Express loans work.
You can apply for an SBA Express loan through an SBA-approved lender, which may be a bank, credit union, or online lender. To do so, you’ll need to complete SBA Form 1919 and any other forms the financial institution requires. While down payment requirements vary, 10% is typical and startups may have to put more down.
Also, if you opt for an Express loan of over $25,000, you will need to back your loan with collateral. If you choose an Export Express, you’ll need to adhere to the particular collateral requirements set forth by your lender.
Even though each individual lender will make their own eligibility decisions, the SBA will respond to Express loan applications within 36 hours and Export Express loan applications within 24 hours. This is much faster than the five to 10 business days the SBA usually takes for other types of loans. Keep in mind that funding times are also lender-dependent, but are typically completed within 30 to 60 days.
How to take out an SBA Express loan.
If you’re interested in an SBA loan, follow these steps to get one.
Determine your borrowing needs: Since SBA Express loans cap out at $500,000, it’s important to figure out how much money you need. If you’d like to borrow more than $500,000, you may have to explore alternative financing solutions.
Verify your eligibility: Before you go ahead and apply for an SBA Express loan, make sure you meet all the criteria. Your business must be considered a small business by the SBA and have reasonable owner equity to invest. Plus you’ll need to prove that you’ve already invested financial resources toward the business. In addition, you’ll be required to meet the individual lender’s criteria, which may include a minimum credit score of 650, at least two years in business, and strong annual revenue.
Choose a lender: Not all SBA lenders are created equal. That’s why you should shop around and find the ideal option for your unique situation. You can always use the SBA lender matching tool on the SBA website to help you out.
Fill out SBA Form 1919: Once you decide on a lender, complete SBA Form 1919. Be prepared to share information about who owns the business, what you intend to do with the funds, the number of employees you have, and whether you’ve received any SBA loans in the past. Double-check your work to avoid errors and inaccuracies, which may lead to delays with approval and funding.
Submit documentation: Some lenders will ask you to provide certain supporting documents with your application. These may include business credit reports, financial statements, personal and business tax returns, and a business plan.
Wait for approval: As stated, the SBA will respond to standard Express loan applications within 36 hours and Export Express loan applications within 24 hours. Once the lender receives the green light from the SBA, it’s up to them to approve your application and distribute the funds. In most cases, however, you’ll be able to close on your loan within 30 to 60 days.
Pros and cons of SBA Express loans.
Like most business financing solutions, SBA Express loans come with benefits and drawbacks you should consider, including:
Pros
Fast turnaround times: If you’re in need of an SBA loan with quick approval and funding times, the SBA Express loan may be a good option. Depending on the type of loan you choose, the SBA may approve your application within 24 or 36 hours. This is quite fast when you consider that it typically takes them at least five to 10 business days to approve other types of loans.
Flexibility with collateral: As long as your loan is less than $25,000, the SBA doesn’t require collateral. If you don’t want to put your personal or business assets on the line, you’re sure to appreciate this type of flexibility.
Easier application: Compared to other types of SBA loans, SBA Express loans have simpler applications. It won’t take you as long to apply for them, so you can expedite the process of securing funding.
Cons
Smaller borrowing amounts: SBA Express loans cap out at $500,000. While this might seem like a lot of money, it might not be sufficient if you have plans to purchase expensive equipment or acquire a business. You might want to consider the traditional SBA 7(a ) program if you need to borrow more money.
Must meet certain qualifications: Unfortunately, SBA Express loans aren’t available to just anyone. To take advantage of them, you must meet stringent criteria set forth by the SBA and the lender you choose.
Lenders may take a while to distribute funds: Even though the SBA approves SBA Express loan applications quickly, it’s up to the individual lenders to provide funding. Depending on the lender you choose, you may still have to wait weeks or even months for the money.
Bottom line
If you’re in the market for an SBA loan, but want to skip the lengthy application and longer approval times of the traditional SBA 7(a) loan, the SBA Express loan should be on your radar. Before you sign on the dotted line, however, weigh the pros and cons to ensure you’re making the most informed decision. Learn more and apply for SBA loans.
According to the U.S. Small Business Administration (SBA), small businesses account for 99.7% of all businesses in the U.S. But what exactly is a small business? Below, we’ll dive deeper into the SBA’s definition of a small business, so you can determine whether you meet SBA loan requirements and qualify for certain benefits.
SBA small business definition.
The SBA’s definition of a small business varies by industry and is defined either by a business’s average annual receipts or by the number of employees.
The SBA’s set size standards for every industry are sorted by the North American Industry Classification System (NAICS). A NAICS code is a six-digit code number that helps companies explain what they do.
If you don’t know what your NAICS code is, visit Census.gov/NAICS to explore your options. In the event you can’t find a perfect match, go with the closest option. Keep in mind that your NAICS code should describe the primary activity of your business or the one that produces the most revenue.
Here’s a look at several industries and the maximum average annual receipts (your gross income plus the “cost of goods sold,” based on your federal tax returns) or number of employees (the number of workers you hire each of the pay periods for the preceding completed 12 calendar months) that qualify them as a small business.
Only one size standard applies per industry.
NAICS code
NAICS industry description
Size standards in millions of dollars
Size standards in number of employees
236118
Residential Remodelers
$45.0
238160
Roofing Contractors
$19.0
311513
Cheese Manufacturing
1,250
312130
Wineries
1,000
423450
Medical, Dental, and Hospital Equipment and SuppliesMerchant Wholesalers
200
445291
Baked Goods Retailers
$16.0
458310
Jewelry Retailers
$20.5
485310
Taxi and Ridesharing Services
$19.0
513110
Newspaper Publishers
1,000
522110
Commercial Banking
$850 million inassets
541310
Architectural Services
$12.5
541810
Advertising Agencies
$25.5
561311
Employment Placement Agencies
$34.0
561730
Landscaping Services
$9.5
611310
Colleges, Universities and Professional Schools
$34.5
In addition to maximum average annual receipts and maximum number of employees, the SBA will consider whether your company is headquartered in the U.S. and whether it primarily operates in the U.S. It will also look into whether your company is a for-profit business and whether it’s independently owned and operated.
Do you qualify as a small business?
To find out if the SBA considers your company a small business, follow these steps.
Look at the figure under average annual receipts or number of employees.
Do some math or research to determine if you meet the threshold for average annual receipts or number of employees.
You can also go to the SBA size standards tool and plug in your NAICS code. The tool will then ask for your average number of employees or average annual receipts. Based on your answer, it will verify whether you meet the SBA’s criteria for a small business.
Benefits of being a small business.
If the SBA does count your company as a small business, you might be wondering how you can take advantage of this classification. Here are some ideas.
SBA loans
There are a number of SBA loan programs that offer low rates and longer repayment terms you might not be able to find elsewhere. The 7(a) loan is the SBA’s most popular program and offers up to $5 million in capital for small business owners. Upon approval, you can use this capital to cover a variety of expenses, such as startup expenses, real estate, short- and long-term working capital, and equipment.
Business development programs.
The SBA has Small Business Development Centers (SBDCs) throughout the U.S. to provide small businesses with counseling, training, and technical assistance. Another organization called SCORE also offers free mentorship and resources. You can utilize these development programs if you qualify as a small business.
Government contracts.
The SBA works partners with federal agencies to award 23% of prime government contract dollars to qualifying small businesses. If you meet the SBA definition for small business, you can submit bids and take advantage of government contracts, which offer an additional, reliable stream of income.
Research grants
The Small Business and Innovation Research research grants are designed to encourage small business owners to dive into technology and commercialization opportunities. While this is a highly competitive program, it also offers small businesses the chance to expand your technological investment and potentially profit from commercialization.
Tax incentives
As a small business, you can also save money with tax incentives. The Small Business Health Insurance Tax Credit, for example, gives eligible small business owners the chance to save up to 50% of employee health care costs, if they buy insurance from the Small Business Health Options Program (SHOP). Some cities, like Philadelphia, also award tax credits to entrepreneurs and small business owners.
Bottom line
If you believe you’re a small business owner, there’s a good chance the SBA does, as well. But your average annual receipts and number of employees may position you as a medium sized or larger business instead. That’s why it’s wise to do some research and determine where you stand. If the SBA does consider you as a small business, go ahead and take advantage of everything you can! See if you qualify and apply for an SBA loan.
The CARES Act included provisions for several financial relief programs to support businesses during the COVID-19 pandemic. One of them, the Employee Retention Credit (ERC), rewards those that continued paying wages despite experiencing decreased revenues or operational shutdowns.
Initially, many taxpayers eligible for the ERC were uncertain whether wages paid to owners employed by their businesses qualified for the payroll tax credit. The Internal Revenue Service (IRS) issued a notice that answers the question definitively, but it can be challenging to decipher.
Here’s a more readily digestible explanation of the guidance to help you understand whether your owner wages qualify for the ERC.
Do Owner Wages Qualify For the ERC?
You probably won’t be able to include owner wages in your calculations when claiming the ERC. The IRS doesn’t expressly forbid it, but its interpretation of familial attribution and constructive ownership rules render most majority owners ineligible. The reasoning behind its position is circuitous, but doesn’t leave room for interpretation.
Previously, the IRS confirmed in its ERC FAQs that wages paid to employees related to their employers aren’t eligible for the ERC. For the purposes of the credit, relatives are defined as the following:
A child or a descendant of a child
A brother, sister, stepbrother, or stepsister
The father or mother, or an ancestor of either
A stepfather or stepmother
A niece or nephew
An aunt or uncle
A son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law
When the employer is a corporation, a related individual includes any person who has one of the relationships above with a majority owner. A majority owner is an individual who directly or indirectly owns at least 50% of the corporation’s stock.
However, the FAQs make no reference to wages paid to owners or their spouses, which led to the previously referenced confusion among taxpayers. To clarify its stance, the IRS issued Notice 2021-49.
Notice 2021-49 asserts that the constructive ownership rules for determining who is considered a majority owner of a corporation apply to the ERC. These rules state that an individual is considered to own, by extension, all stock their family members own. Family members include ancestors, siblings (whole or half), and lineal descendants.
Here’s where things get a little confusing. The notice then alleges that applying these rules to the ERC means that wages paid to majority owners with living siblings, ancestors, or lineal descendants don’t qualify for the tax credit.
Here’s the logic: If you’re a majority owner, your siblings, ancestors, and lineal descendants are also considered majority owners. Because they’re considered a majority owner, you’re related to a majority owner. As an employee related to a majority owner, your wages aren’t eligible for the ERC, per the original exclusion in the FAQs.
Ultimately, you must have no living ancestors, siblings, or lineal descendants to claim the ERC for your wages as a majority owner. Alternatively, you can be a minority owner with less than 50% ownership in your corporation after taking the family attribution and constructive ownership rules into account.
Note: Since only corporations can pay wages to their owners, they’re the only employers relevant to this discussion. If your business operates under any other legal entity structure, then owner compensation is automatically disqualified from the ERC.
Examples of Owner Wages and the ERC
The rules regarding owner wages and their eligibility for the ERC can be frustratingly abstract. Let’s discuss some examples to help you understand whether you can claim the ERC for your owner wages.
Owner Wages Ineligible
Corporation A is an employer that can claim the ERC for qualified wages paid in 2020. During that period, it paid wages to John, who owns 60% of Corporation A’s stock. John has a wife named Susan and a daughter named Mary, both of whom also work for the company.
Because Mary is related to John, a majority owner, her wages don’t qualify for the ERC. In addition, as his family member, she’s also considered a majority owner. Because John is related to Mary, a majority owner, neither his nor his wife’s wages qualify for the ERC.
Owner Wages Eligible
Corporation B is an employer that can claim the ERC for qualified wages paid in 2021. During that period, it paid wages to Lisa, who owns 100% of Corporation B’s stock. Lisa has no living ancestors, siblings, or lineal descendants. Her husband, Chris, also works for Corporation B.
Lisa is a majority owner, but she has no relatives who meet the requirements to share her status by extension. As a result, qualified wages paid to her and her husband are eligible for the ERC if the amounts satisfy the other requirements to be treated as qualified wages..
Apply For the ERC
The ERC can be incredibly lucrative, with the potential to reduce your payroll tax liability by $26,000 for each employee retained through 2020 and 2021. The window to earn the credit is closed, but eligible businesses can still claim the credit retroactively. Even if your wages don’t qualify due to the owner exclusion, you may still be eligible for a credit if you had employees on the payroll during the pandemic.
Social media can be a game-changer for small businesses—if you know how to use it. This guide covers everything from choosing the right platforms to creating engaging content and growing your audience. With actionable tips and proven strategies, you’ll learn how to turn likes and follows into real business results.
Email marketing is one of the most powerful tools for small businesses—when done right. This guide covers everything from building your email list to crafting engaging campaigns that drive results. With actionable tips and step-by-step guidance, you’ll learn how to connect with your audience, boost sales, and grow your business through email.
Digital marketing doesn’t have to be overwhelming. This guide simplifies the essentials, from building an online presence to leveraging social media, email, and SEO. Packed with practical tips and step-by-step strategies, it’s designed to help small businesses succeed in the digital world without a big budget or a full marketing team.
Let’s face it. There’s a lot of bad marketing advice out there. Or great advice that’s far too in-depth for a small business owner who isn’t looking to start a full-time career in marketing. We created this guide to cut through the clutter and provide you with principles, direction and the applicable step-by-step how-tos to get the job done.
Your brand is more than just a logo—it’s the heart of your business. This guide walks you through the essentials of small business branding, from defining your identity and crafting your message to building a strong, lasting impression. With clear steps and actionable advice, you’ll create a brand that resonates with customers and sets your business apart.
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Running and growing a business is no easy feat. Our guide to running a business has everything you need to know to keep things running smoothly. From managing employees to marketing your business, we’ve got you covered.
Take your business to the next level with our Accounting Guide. Master the language of numbers, understand financial statements, and make informed decisions based on accurate financial data. Discover the power of sound financial management.
Master the art of cash flow management with our comprehensive guide. Learn strategies to optimize your cash flow, forecast revenue and expenses, and keep your business financially stable. Take control of your finances and achieve long-term success.
Streamline your billing process with our Invoicing Guide. Learn how to create professional invoices, manage client payments, and maintain a healthy cash flow for your business. Get paid faster and efficiently track your revenue.
A great marketing strategy is the foundation of small business success. This guide takes you step-by-step through defining your goals, identifying your audience, and choosing the right channels. With practical tips and clear direction, you’ll build a tailored strategy that drives growth and delivers measurable results.
Navigate the complex world of taxes with our Tax Preparation Guide. From understanding tax obligations to maximizing deductions and filing quarterly taxes, we’ll help you stay compliant and minimize your tax burden. Unlock the secrets of tax success for your business.
Stay on top of your business finances with our Bookkeeping Guide. Learn the art of tracking income and expenses, maintaining financial records, and keeping your books in order. Unlock financial success with our expert tips.
Need help securing funding for your business? Our business loans guide simplifies the financing process, explains key terms, and walks you through your loan options.
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