Funding for Attorney s and Lawyers3322251
For a law that practices contingent litigation managing income is quite crucial. Sadly managing ones income is an afterthought for the majority of trial lawyers. Income is very sporadic as they only receive money when cases are successfully concluded. With a lot of cases taking many years to bring to conclusion projecting ones cash flow can be a daunting task.
Contingent firms typically advance all of the cost of litigation upfront in substitution for a percentage from the recovery. In a contingent case a strong may invest hundreds of attorney hours and hundreds and hundreds of dollars right into a case. In case a firm loses an instance it loses not merely its time however the cash dedicated to hard costs too. It worsens, a firm is not allowed to deduct the money they have tied up is case costs. Furthermore they have to fund the amount of money up front nevertheless they have to fund it with after tax dollars. Then they repeat the cycle and plow the fees from successful cases in to the next group of cases.
The missing ingredient in improving income for most contingent law firms is something most businesses have already been utilizing for years. Leverage. Most lawyers have funded costs out of pocket since they started, only because that's the actual way it has always been done.
A revolving line of credit can be one of the most crucial tools in a plaintiff lawyers fight for justice. By using borrowed money to fund litigation expenses a company can remove the negative tax consequences of self funding. The firm actually realizes the income it is receiving in fees. Any interest a strong pays may be offset with the money which was tied up just in case costs designed for firm expansion or outside investments. But the biggest advantage has stopped being using after tax dollars to fund case development expenses.
We're in a time where trial lawyers have more options than ever when it comes to financing their practice, from traditional banks and specialty financial institutions to legal finance consultants. Contingent lawyers can and should pay attention to the main point here if they desire to continue helping their clients.
