Funding for Attorney s and Law Firms
For a litigation that practices contingent litigation managing cash flow is very important. Sadly managing ones cash flow is an afterthought for many trial lawyers. Cashflow is very sporadic since they only get paid when cases are successfully concluded. With a lot of cases taking several 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 substitution for a percentage of the recovery. In the contingent case a strong may invest a huge selection of attorney hours and thousands of dollars right into a case. If a firm loses an incident it loses not only its time but the cash committed to hard costs also. It gets worse, a firm isn't allowed to deduct the cash they have tied up is case costs. Furthermore they have to fund the 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 into the next band of cases.
The missing ingredient in improving cashflow for most contingent lawyers is something most businesses happen to be utilizing for decades. 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 line of credit can be one of the most important tools inside a plaintiff lawyers fight for justice. Through the use of 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 can be offset with the money that was tied up in case costs available for firm expansion and out investments. Nevertheless the biggest advantage has stopped being using after tax dollars to fund case development expenses.
We are in a time where trial lawyers have more options than ever when it comes to financing their practice, from traditional banks and specialty finance companies to legal finance consultants. Contingent lawyers can and should pay attention to the main point here if they need to continue helping their customers.
Contingent firms typically advance every one of the cost of litigation upfront in substitution for a percentage of the recovery. In the contingent case a strong may invest a huge selection of attorney hours and thousands of dollars right into a case. If a firm loses an incident it loses not only its time but the cash committed to hard costs also. It gets worse, a firm isn't allowed to deduct the cash they have tied up is case costs. Furthermore they have to fund the 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 into the next band of cases.
The missing ingredient in improving cashflow for most contingent lawyers is something most businesses happen to be utilizing for decades. 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 line of credit can be one of the most important tools inside a plaintiff lawyers fight for justice. Through the use of 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 can be offset with the money that was tied up in case costs available for firm expansion and out investments. Nevertheless the biggest advantage has stopped being using after tax dollars to fund case development expenses.
We are in a time where trial lawyers have more options than ever when it comes to financing their practice, from traditional banks and specialty finance companies to legal finance consultants. Contingent lawyers can and should pay attention to the main point here if they need to continue helping their customers.
