Funding for Attorney s and Law offices3432019
For a litigation that practices contingent litigation managing cashflow is vitally important. Sadly managing ones cashflow is an afterthought for the majority of trial lawyers. Cashflow is very sporadic since they only get paid when cases are successfully concluded. With many cases taking many years to bring to conclusion projecting ones cashflow can be a daunting task.
Contingent firms typically advance all the cost of litigation upfront in substitution for a percentage from the recovery. In the contingent case a company may invest hundreds of attorney hours and tens of thousands of dollars right into a case. If your firm loses an instance it loses not merely its time however the cash committed to hard costs also. It worsens, a firm isn't allowed to deduct the money they have tangled up is case costs. Practically they have to fund the cash up front but they have to fund it with after tax dollars. They repeat the cycle and plow the fees from successful cases into the next band of cases.
The missing ingredient in improving income for most contingent lawyers is something most businesses have been utilizing for years. Leverage. Most lawyers have funded costs with your own money since they started, only because that's the way it has always been done.
A revolving line of credit can be one of the most crucial tools in the plaintiff lawyers fight for justice. Through the use of borrowed money to invest in litigation expenses a firm can get rid of the negative tax consequences of self funding. The firm actually realizes the wages it is receiving in fees. Any interest a firm pays can be offset by having the money that has been tied up just in case costs available for firm expansion and out investments. But the biggest advantage is not using after tax dollars to fund case development expenses.
We're in a time where trial law firms have more options than in the past 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 important thing if they need to continue helping their potential customers.
