Law firms of all sizes and specialties struggle with financial constraints due to inadequate access to working capital. A firm might have a full portfolio of promising cases, but extended litigation delays access to the related assets.
Law firm funding recognizes the value of meritorious legal cases and provides attorneys and firms the opportunity to collateralize those cases to create cash flow, improve service to clients, and invest in business growth.
What’s Different about Law Firm Funding?
Banks and other traditional lenders often do not accept pending legal cases as collateral for a business loan. As a result, it is common for attorneys to offer personal assets as collateral for law firm business loans just to have access to bridge capital while their cases are pending.
One potential solution is for law firms to reduce expenses during the pendency of strong cases. This creates an unhealthy cycle of feast or famine that inadequately supports the best interests of clients and may limit firm growth.
Law firm funding offers a better option. The funding is not a loan; it’s an investment. This non-recourse approach greatly reduces risk for the firm. If the case or cases funded are resolved favorably, funds are repaid per the funding agreement. If not, repayment is not required.
Benefits of Non-Recourse Funding for Law FirmsA lack of working capital can limit a law firm’s ability to accept and appropriately pursue legal cases. Firms lacking a capital surplus or independent income stream are at a disadvantage when a promising case comes along. If they take the case, a lack of adequate resources can hurt both the firm and the client. Fortunately, a forced settlement due to a lack of liquid resources is an avoidable outcome.
Law firm funding helps firms take the cases they want and see those cases to the best possible conclusion.
Better client service and case outcomes will strengthen a law firm’s book of business and goodwill. However, the benefits of law firm funding extend well beyond individual case performance and intangible benefits. Firms also have the discretion to use law firm funding for basic business needs and growth.
Who Uses Law Firm Funding?
Law firms of all sizes, from sole practitioners to Fortune 500s, use law firm funding to optimize favorable case results, fund firm operations, and support business growth. Examples of legal practice areas that can benefit from law firm funding include the following:
- Commercial law litigation;
- Competitive and antitrust matters;
- Class action lawsuits and defense;
- DIP (debtor-in-possession) and insolvency cases;
- International arbitration;
- Patent litigation; and
- Securities and shareholder litigation.
This list is far from comprehensive. In truth, attorneys serving clients in all areas of the law can often benefit from the low risk and flexibility provided by this alternative financing option.
Experienced Professionals Need a Knowledgeable Funding Partner
Attorneys spend years learning the law and honing their skills, and they need a funding partner who can say the same. The underwriters at Pravati Capital are experienced in both law and finance, and they are highly skilled at case evaluation.