Funding for Attorney s and Law Firms6353001

For a arbitration that practices contingent litigation managing income is very important. Sadly managing ones income is an afterthought for most trial lawyers. Income is very sporadic because they only get paid when cases are successfully concluded. With a lot of cases taking years to bring to conclusion projecting ones cash flow can be a daunting task.

Contingent firms typically advance all the cost of litigation upfront in exchange for a percentage with the recovery. In the contingent case a strong may invest hundreds of attorney hours and thousands of dollars right into a case. If your firm loses a case it loses not only its time however the cash invested in hard costs too. It gets worse, a firm is not allowed to deduct the cash they have bound is case costs. Not only do they have to fund the amount of money up front however they have to fund it with after tax dollars. They repeat the cycle and plow the fees from successful cases into the next number of cases.

The missing ingredient in improving cash flow for most contingent law firms is something most businesses have already 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 credit line can be one of the most important tools inside a plaintiff lawyers fight for justice. By utilizing borrowed money to invest in litigation expenses a firm can remove the negative tax consequences of self funding. The firm actually realizes the income it is receiving in fees. Any interest a firm pays may be offset insurance firms the money that has been tied up in case costs available for firm expansion and out investments. Nevertheless the biggest advantage is not using after tax dollars to invest in case development expenses.

We are in a time where trial lawyers 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 main point here if they need to continue helping their clients.