Funding for Attorney s and Law Firms9169021
For a law that practices contingent litigation managing income is quite crucial. Sadly managing ones cashflow 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 income can be a daunting task.
Contingent firms typically advance all the cost of litigation upfront in return for a percentage from the recovery. In a contingent case a strong may invest hundreds of attorney hours and tens of thousands of dollars right into a case. In case a firm loses an instance it loses not just its time however the cash dedicated to hard costs also. It worsens, a firm isn't allowed to deduct the cash they have tied up is case costs. Furthermore they have to fund the cash up front nevertheless they have to fund it with after tax dollars. Then they repeat the cycle and plow the fees from successful cases to the next number of cases.
The missing ingredient in improving cashflow for most contingent lawyers is something most businesses happen to be 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 in a plaintiff lawyers fight for justice. By utilizing borrowed money to finance 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 company pays may be offset with the money which was tied up just in case costs available for firm expansion or outside investments. Nevertheless the biggest advantage is no longer using after tax dollars to fund case development expenses.
We're in a time where trial law offices have more options than ever when it comes to financing their practice, from traditional banks and specialty finance companies to legal finance consultants. Contingent lawyers can and should pay attention to the main point here if they desire to continue helping their clients.
