Funding for Attorney s and Law offices4438699
For a moldova that practices contingent litigation managing cashflow is vitally important. Sadly managing ones income is an afterthought for most trial lawyers. Cash flow is very sporadic since they only get paid when cases are successfully concluded. With many cases taking years to bring to conclusion projecting ones cashflow can be a daunting task.
Contingent firms typically advance all of the cost of litigation upfront in exchange for a percentage from the recovery. In a contingent case a company may invest countless attorney hours and tens of thousands of dollars in to a case. If a firm loses an incident it loses not just its time nevertheless the cash invested in hard costs as well. It gets worse, a firm is not allowed to deduct the money they have tied up is case costs. Practically 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 band of cases.
The missing ingredient in improving income for most contingent law firms is something most businesses have been utilizing for years. 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 inside a plaintiff lawyers fight for justice. By using borrowed money to finance litigation expenses a company can remove the negative tax consequences of self funding. The firm actually realizes the wages it is receiving in fees. Any interest a company pays can be offset with the money that was tied up in the event costs available for firm expansion and out investments. But the biggest advantage is no longer using after tax dollars to finance case development expenses.
We are in a time where trial law offices 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 must pay attention to the main point here if they desire to continue helping their potential customers.
