Funding for Attorney s and Lawyers6826116
For a litigation that practices contingent litigation managing income is very important. Sadly managing ones income is an afterthought for most trial lawyers. Income is very sporadic since they only get money when cases are successfully concluded. With a lot of cases taking years to bring to conclusion projecting ones income can be a daunting task.
Contingent firms typically advance all of the cost of litigation upfront in return for a percentage of the recovery. In a contingent case a firm may invest hundreds of attorney hours and tens of thousands of dollars in to a case. If a firm loses an incident it loses not merely its time nevertheless the cash invested in hard costs too. It worsens, a firm isn't allowed to deduct the money they have tangled up is case costs. Furthermore they have to fund the cash up front but 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 cash flow for most contingent law offices is something most businesses have already been utilizing for decades. Leverage. Most lawyers have funded costs with your own money 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 main tools in the plaintiff lawyers fight for justice. Through the use of borrowed money to finance litigation expenses a company can eliminate the negative tax consequences of self funding. The firm actually realizes the income it is receiving in fees. Any interest a strong pays could be offset with the money that was tied up in case costs available for firm expansion and out investments. Nevertheless the biggest advantage is not using after tax dollars to fund case development expenses.
We have been in a time where trial law firms have more options than ever before when it comes to financing their practice, from traditional banks and specialty financial institutions to legal finance consultants. Contingent lawyers can and must pay attention to the main point here if they desire to continue helping their clients.
