You do not need a lawyer to sue in Small Claims Court. But you may hire one, if you want. The other side may also hire a lawyer. The Court will not give you a lawyer.
Conclusion: Going to small claims court may be worth it for $500, but it will determine how you weigh your costs versus benefits. At a minimum, it is worth it to send a demand letter.
Court costs usually include: filing fees, charges for serving summons and subpenas, court reporter charges for depositions (which can be very expensive), court transcripts and copying papers and exhibits. The prevailing party in a lawsuit is usually awarded court costs.
If the defendant does not come to court, an inquest will likely be held and a decision made in favor of the Claimant (the person who filled the suit in Small Claims court). An inquest is a non-jury trial where you present proof of the amount of your damages.