Negotiating upfront legal costs

May 06, 2023

by a searcher from George Washington University in New York, NY, USA

Hey everyone, I'm in the midst of selecting a lawyer for a deal and I've been noticing an interesting trend with legal fees. Most of the lawyers we talk to are trying to charge high upfront retainers and then refund us any unused part of the retainer.

Most of the resources I've read online talk about including legal fees in the closing fees of the SBA loan and I was under the impression that we could pay most legal costs after the deal closes.

I'm curious what other people are seeing in the market. Is it common to pay almost all legal costs upfront and then pay yourself back via the SBA closing fees OR do most people pay the lawyer with the closing fees from the SBA loan after the deal closes?

Reply by a professional
from The University of Alabama in Birmingham, AL, USA

I have seen plenty of deals where the buy side attorney collects nothing or a nominal retainer up front. The fee can be baked into closing costs and paid directly, or just a working Capital use you pay them the day the deal funds.

If we include them in your project costs and you pay them out of pocket up front, that can counts towards your required equity injection.

Reply by an intermediary
from The University of Chicago in Chicago, IL, USA

Legal fees are due to the lawyer whether the deal closes or not. Timing of payment varies. Depending on experience and relationship, there may be a) some retainer, b) some as deal progresses and c) rest at Closing. Many lawyers will trim fee if the deal does not close; they want you to come back on the next one.

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