The practice of law often brings unique cash flow challenges. Some clients pay hourly fees, while others under a contingency agreement may only pay from proceeds after successful case resolution. In the meantime, the lawyer or firm continues to bear operational costs. Whether your cashflow matters fit neatly into one of these examples or are the result of a complex caseload, alternative financing for lawyers is a practical and risk-free solution.
Lawyers need capital for many reasons. A boutique firm may need stopgap financing pending the outcome of a sizable contingency fee case. A firm of any size may want to leverage its significant cases in order to acquire new talent, grow the firm, or expand into new regions or markets. And corporate legal departments turn to litigation financing to avoid diverting cash flow from operations or growth of the company.
Regardless of the reason, litigation funding is a shrewd financing option for lawyers, firms, and in-house counsel. The repayment obligation arises only if you prevail on the pledged case or cases, and each financing transaction is tailored to meet the recipient’s particular needs.
The key factor in any financing transaction is the collateral. The same is true for litigation financing. With the right collateral (your caseload), any attorney is eligible to seek legal funding. As a result, this alternative funding option is open to any practitioner regardless of the number of lawyers in the firm, the identity of the firm, or status as in-house counsel.
A solo practitioner may have a completely different reason for pursuing attorney funding than a large international law firm, but the option is open to both—and to anyone in between. As the number of lawyers taking advantage of alternative financing increases, the variety of attorneys obtaining litigation funding will expand even further to include firms of any size.
In-house counsel also benefit from legal funding. Although not dependent on client fees as in private practice, in-house legal departments are no less subject to budgetary constraints.
In-house counsel are increasingly turning to litigation financing to support operations and manage risk. With litigation funding, in-house counsel can avoid settling in cases where they might otherwise fear the company’s financial exposure could be too great. Financing also helps legal departments avoid diverting operational budgets to extraordinary litigation expenses.
Attorneys may pledge a single, promising case or a portfolio of cases as collateral for legal financing. While the type and value of a case are the main features evaluated to determine eligibility for legal funding advances, the size of proceeds anticipated in a case is the chief factor in determining its value as collateral.
Cases in any practice area can be leveraged in this way, but legal funding tends to be more common in certain legal fields:
Legal funding advances vary in size depending in large part on the value of the case or cases underwritten. A single case may be expected to result in a settlement or award significantly greater than a portfolio of cases.
In all cases, underwriters evaluate the nature of each case and relevant legal precedent to determine the likelihood of its success. From this information, the finance company establishes the amount to be financed on a single case or portfolio and the terms of financing.
For more information on financing for lawyers or your eligibility for legal funding, contact Pravati Capital, a leader in legal financing, by calling 844-772-8284 or by filling out our online contact form.