Funding for Attorney s and Law Firms8841764
For a arbitration that practices contingent litigation managing cash flow is vitally important. Sadly managing ones cash flow is an afterthought for the majority of trial lawyers. Cash flow is very sporadic as they only receive money when cases are successfully concluded. With a lot of cases taking 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 with the recovery. In the contingent case a company may invest hundreds of attorney hours and tens of thousands of dollars in to a case. If your firm loses an instance it loses not only its time nevertheless the cash committed to hard costs as well. It becomes worse, a firm isn't allowed to deduct the amount of money they have tied up is case costs. Not only do they have to fund the money up front however 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 income 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 credit line can be one of the most crucial tools in a plaintiff lawyers fight for justice. By using borrowed money to finance litigation expenses a company 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 could be offset with the money that has been tied up just in case costs readily available for firm expansion and out investments. However the biggest advantage has stopped being using after tax dollars to fund case development expenses.
We have been in a time where trial lawyers 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 should pay attention to the bottom line if they need to continue helping their clients.