Funding for Attorney s and Lawyers818713
For a legal that practices contingent litigation managing cashflow is quite crucial. Sadly managing ones cash flow is an afterthought for the majority of trial lawyers. Income is very sporadic since they only get paid when cases are successfully concluded. With lots of cases taking many years to bring to conclusion projecting ones cash flow can be a daunting task.
Contingent firms typically advance every one of the cost of litigation upfront in exchange for a percentage of the recovery. In a contingent case a firm may invest countless attorney hours and hundreds and hundreds of dollars right into a case. If a firm loses a case it loses not merely its time nevertheless the cash invested in hard costs too. It becomes worse, a firm is not allowed to deduct the cash they have tangled up is case costs. Practically they have to fund the money up front nevertheless they have to fund it with after tax dollars. They repeat the cycle and plow the fees from successful cases to the next group of cases.
The missing ingredient in improving cashflow for most contingent lawyers is something most businesses have already been utilizing for decades. 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. Through the use of borrowed money to invest in 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 may be offset insurance firms the money which was tied up in case costs readily available for firm expansion or outside investments. But the biggest advantage is not using after tax dollars to finance case development expenses.
We are in a time where trial law firms 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 ought to pay attention to the main point here if they desire to continue helping their clients.
