Funding for Attorney s and Law Firms3442728
For a legal that practices contingent litigation managing income is quite crucial. Sadly managing ones income is an afterthought for many trial lawyers. Cashflow is very sporadic since they only get money when cases are successfully concluded. With lots of cases taking years to bring to conclusion projecting ones cashflow can be a daunting task.
Contingent firms typically advance every one of the cost of litigation upfront in substitution for a percentage with the recovery. Inside a contingent case a firm may invest countless attorney hours and thousands of dollars into a case. If your firm loses an instance it loses not just its time but the cash invested in hard costs as well. It gets worse, a firm isn't allowed to deduct the money they have bound is case costs. Furthermore they have to fund the money up front however they have to fund it with after tax dollars. Chances are they repeat the cycle and plow the fees from successful cases in to the next band of cases.
The missing ingredient in improving income for most contingent law offices is something most businesses have already been utilizing for decades. Leverage. Most lawyers have funded costs out of pocket since they started, only because that's the way it has always been done.
A revolving credit line can be one of the main tools in a plaintiff lawyers fight for justice. By using borrowed money to fund litigation expenses a strong can get rid of the negative tax consequences of self funding. The firm actually realizes the income it is receiving in fees. Any interest a company pays could be offset by having the money that was tied up just in case costs available for firm expansion and out investments. However the biggest advantage is not using after tax dollars to fund case development expenses.
We're in a time where trial lawyers have more options than in the past when it comes to financing their practice, from traditional banks and specialty banks to legal finance consultants. Contingent lawyers can and ought to pay attention to the important thing if they wish to continue helping their clients.
