Non-equity partner here, planning to put my name in the hat for an equity vote next fall. Looks like my buy-in will be approximately $100k. Question: how do people pay for their buy-in? I've diverted my 401k savings into a savings account for now (my firm doesn't offer a match, but gives us a flat percentage of salary contribution), but won't have the entire amount in the bank by next year. Thoughts? Personal loan? Home equity? Other?

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Big law has exclusive banking relationships that offer capital loans. Some are interest only into perpetuity; others require 3-7 year amortization. Depends on the firm and the bank. But before you think big law has it easy, let me share that our equity buy in at my firm is close to 60% of my annual earnings. The firm is debt free, but the equity partners are not.

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Most firms have preferred banking arrangements who will offer you a capital contribution loan on favorable terms (most equity partners are viewed as low risk). When I made equity, the firm gave me contact info and summary terms from 3 banks. I reached out to each and they gave me current rates for several different types of loans, varied in both term and structure (interest only, balloon, etc). It was an easy process. Be sure to take into consideration your firm’s distribution schedule - you get a big chunk of cash at the end of the year, so consider paying interest during the year and then making a large principal payment in January.

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Thanks P1 and P2. I've already asked the question about existing relationships between my firm and banks for distribution loans, but no dice. I guess I'll need to call around to some bankers to shop terms. I guess private bankers? Thanks.

There are loans available.

Some firms also will directly make the loan at favorable rates. I imagine your firm would’ve told you but might be worth checking.

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