Funding for Attorney s and Lawyers4639547
For a litigation that practices contingent litigation managing cashflow is very important. Sadly managing ones cash flow is an afterthought for most trial lawyers. Cashflow is very sporadic as they only get money when cases are successfully concluded. With lots of cases taking many 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 from the recovery. In the contingent case a company may invest a huge selection of attorney hours and tens of thousands of dollars right into a case. If your firm loses a case it loses not just its time however the cash committed to hard costs also. It gets worse, a firm just isn't allowed to deduct the amount of money they have tangled up is case costs. Practically they have to fund the amount of money up front however they have to fund it with after tax dollars. Chances are they repeat the cycle and plow the fees from successful cases to the next group of cases.
The missing ingredient in improving income for most contingent law offices 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 actual way it has always been done.
A revolving credit line can be one of the main tools in the plaintiff lawyers fight for justice. By utilizing borrowed money to finance litigation expenses a firm can remove 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 with the money that has been tied up in case costs readily available for firm expansion or outside investments. However the biggest advantage has stopped being using after tax dollars to finance case development expenses.
We have been 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 important thing if they need to continue helping their clients.
