Funding for Attorney s and Lawyers9389572
For a litigation that practices contingent litigation managing cashflow is vitally important. Sadly managing ones income is an afterthought for the majority of trial lawyers. Income is very sporadic as they only receive money when cases are successfully concluded. With lots of cases taking several 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 substitution for a percentage from the recovery. In the contingent case a firm may invest a huge selection of attorney hours and tens of thousands of dollars in to a case. In case a firm loses a case it loses not merely its time nevertheless the cash invested in hard costs as well. It becomes worse, a firm is not allowed to deduct the money they have tangled up is case costs. Practically they have to fund the cash up front but they have to fund it with after tax dollars. They repeat the cycle and plow the fees from successful cases in to the next group of cases.
The missing ingredient in improving cash flow for most contingent law firms is something most businesses have been utilizing for decades. Leverage. Most lawyers have funded costs up front since they started, only because that's the actual way it has always been done.
A revolving credit line can be one of the most crucial tools in a plaintiff lawyers fight for justice. By utilizing borrowed money to invest in litigation expenses a strong can eliminate 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 with the money that has been tied up just in case costs available for firm expansion and out investments. Nevertheless 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 in the past when it comes to financing their practice, from traditional banks and specialty banks to legal finance consultants. Contingent lawyers can and ought to pay attention to the main point here if they need to continue helping their potential customers.
