Like any business, a law firm may sometimes suffer from an inconsistent income stream. But unlike other businesses, law firms have a unique option available to address this issue: law firm funding. This alternative financing method allows law firms to leverage strong cases now rather than waiting for settlement to come in later. Best of all, the choice of how to use law firm funding is yours, from paying current expenses and financing new cases to growing the firm.
Smart practitioners know that the firm’s current caseload can generate capital twice. With litigation funding, a law firm can pledge a portion of the proceeds anticipated from one or more cases as collateral for an advance or line of credit today and then earn fees and repay the advance or draw when it wins the case or cases.
Even if aware of this alternative financing option, not all law firms are sure how to use law firm funding. They can’t imagine that it could be that easy to capitalize on their current cases or even what the limits are on using the funding. But the sky’s the limit, as they say—the funding can be used for any firm-related purpose.
The independence of law firm control is sacrosanct. Seeking financing sometimes creates a feeling of vulnerability to that control. Law firm financing leaves the control of the firm and of the use of funding strictly with the firm.
The terms of law firm funding allow a firm to use the money in whatever way it sees fit—whether that means covering personnel and other operating expenses while carrying a caseload involving complex litigation or even expanding the firm’s talent and geographical reach. Litigation funding offers law firms the flexibility to use the funding in whatever manner best serves the continued growth or prosperity of the practice.
Firms handling a significant load of contingency fee cases or even a single case involving complex litigation may struggle to generate enough cash flow to meet overhead and other ongoing expenses. Litigation funding is alternative financing for lawyers that fills that void.
Some areas of law tend to require more resources and generate sizeable—albeit sporadic—income for the firms handling them. Cases that fall in this category are often found in the following areas:
Law firm decisionmakers turn to law firm funding to bolster financial security today, knowing repayment will be due when—and only when—the collateralized case or cases win.
A law firm is a business that requires discernment and careful planning in its operation and management. When a firm’s goal is growth, financial planning is key to avoid jeopardizing current operations. Because there are no strings on how law firms may use litigation funding, they may use the capital they receive to fund growth or expansion.
Discerning lawyers know that litigation funding allows them the opportunity to explore growth options using existing resources. Funding is secured by pledging one or more cases anticipated to have a significant return and repayment of the advance or line of credit is required only when a pledged case is successful. In other words, litigation funding is non-recourse financing that allows a firm a risk-free means to acquire talent, expand staff support, and even extend its geographic base.
Law firm funding uses are limited only by a firm leadership’s creativity. Using one or more existing cases as collateral, firms are free to use the resulting advance as they see fit, and repayment is required only by success in the pledged case or portfolio of cases, which in turn funds that repayment.