Attorneys and their law firms have more options than ever before for raising capital to supplement or grow their practices. Traditional capital sources like institutional loans involve a cumbersome application process and are hard on the firm and partner balance sheets. After investigating alternative sources of capital for law firms, an increasing number of attorneys turns to portfolio funding.
Portfolio Funding: A Low-Risk Use of Firm Assets
Law firms investigating financing methods often have the means to accomplish that within the office: their caseload. With portfolio funding, a law firm can pledge winning cases and capitalize on their value even before their final resolution. This low-risk funding mechanism lets firms make the most of their existing assets to further current and future litigation, operations, business development, or firm growth.
How Portfolio Funding Works
With portfolio funding, firms can use those cases as a source of capital while litigation or settlement negotiations are ongoing. The firm’s first step is to identify cases the firm believes will result in an award or settlement. The firm summarizes the facts and law for the law firm financing company. The financing company’s underwriters evaluate the cases and the relevant law to determine their value as collateral.
Once the underwriters have vetted and valued the cases, the funder offers a financing package based on the aggregate value of the pledged cases. The cases included in the portfolio are cross-collateralized, meaning each serves as security for the overall funding.
Upon acceptance of a financing package, the firm has a pre-determined amount at its disposal to further the firm’s business goals. And the capital is non-recourse, meaning only the successful resolution of a case triggers the obligation for repayment.
Portfolio Funding Benefits Firms Across All Practice Areas
Law firms around the world take advantage of portfolio funding to meet their capital needs. Cases in any practice area or type of litigation can serve as collateral for this form of law firm funding, including these:
- Commercial litigation;
- Antitrust cases;
- Class actions;
- Debtor-in-possession (DIP) financing cases;
- General insolvency litigation;
- International arbitration;
- Patent litigation; and
- Securities and shareholder lawsuits.
Further, firms can include cases in all phases of litigation in a portfolio for funding whether they are in pre-settlement negotiations, early to mid-litigation stage, or post settlement or judgment.
Taking the Next Step to Secure Capital for Law Firms
Portfolio funding is one of the premier capital sources for law firms, allowing them to combine the prospects in promising cases to obtain non-recourse, low-risk capital today while the cases are still pending. And all it takes is a phone call to start the ball rolling.
Pravati Capital is a frontrunner in helping law firms find the money they need to thrive. For more information on portfolio funding, contact us by calling 844-772-8284 or complete our online contact form.