Funding for Attorney s and Law Firms3389986
For a corporate that practices contingent litigation managing cashflow is very important. Sadly managing ones cashflow is an afterthought for many trial lawyers. Income is very sporadic because they only receive money when cases are successfully concluded. With a lot of cases taking years to bring to conclusion projecting ones cashflow can be a daunting task.
Contingent firms typically advance every one of the cost of litigation upfront in substitution for a percentage from the recovery. In a contingent case a firm may invest hundreds of attorney hours and thousands of dollars right into a case. If a firm loses an incident it loses not just its time however the cash committed to hard costs also. It worsens, a firm is not allowed to deduct the money they have tied up is case costs. Not only do they have to fund the amount of money up front but they have to fund it with after tax dollars. Then they repeat the cycle and plow the fees from successful cases to the next band of cases.
The missing ingredient in improving cashflow 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 actual way it has always been done.
A revolving personal credit line can be one of the main tools in the plaintiff lawyers fight for justice. By utilizing borrowed money to fund litigation expenses a strong 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 may be offset insurance firms the money which was tied up in case costs available for firm expansion or outside investments. But the biggest advantage is no longer using after tax dollars to invest in case development expenses.
We are in a time where trial lawyers have more options than ever before when it comes to financing their practice, from traditional banks and specialty finance companies to legal finance consultants. Contingent lawyers can and ought to pay attention to the main point here if they need to continue helping their customers.
