Funding for Attorney s and Law offices8552482
For a representation that practices contingent litigation managing income is very important. Sadly managing ones cashflow is an afterthought for the majority of trial lawyers. Cashflow is very sporadic as they only get paid when cases are successfully concluded. With many cases taking several 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 substitution for a percentage from the recovery. In the contingent case a strong may invest hundreds of attorney hours and hundreds and hundreds of dollars in to a case. In case a firm loses an incident it loses not just its time however the cash dedicated to hard costs also. It becomes worse, a firm is not allowed to deduct the cash they have bound is case costs. Practically they have to fund the cash up front however they have to fund it with after tax dollars. Chances are they repeat the cycle and plow the fees from successful cases to the next number of cases.
The missing ingredient in improving income 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 important tools in the 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 wages it is receiving in fees. Any interest a strong pays can be offset by having the money that was tied up in case costs readily available for firm expansion or outside investments. But the biggest advantage is not using after tax dollars to fund case development expenses.
We are in a time where trial law offices 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 must pay attention to the bottom line if they wish to continue helping their clients.