When seeking out resources for your firm, you want to be sure that companies you engage with fully understand the nature of your practice and the nuances of contingency fee practice.
So how do you accomplish that when obtaining law firm funding? Choose a lender that’s familiar to you—one that has a lengthy and trustworthy history funding only plaintiffs’ counsel. Also, find a financier that has attorneys on staff who understand your cases and can help you navigate the process.
Given the fact that your contingent fees are your greatest asset—and assets are an important part of obtaining specialized legal financing—it’s imperative that the funder has extensive experience in the your firm’s area of litigation. Traditional lenders typically overlook or are unfamiliar with the intricacies of contingent fees and therefore do not take them into account when determining your borrowing capacity. This, in turn, may shortchange your firm, leaving you without adequate resources for new ventures or rapid growth.
Here are 3 ways working with a law firm funder who understands your law firm, its practice and business model can significantly improve the experience:
1) More borrowing capacity
This is the most important factor: most lenders cannot truly evaluate your contingent collateral; thus, your borrowing capacity is limited to an assessment of other, more traditional assets such as real property, cash in savings, retirement plans, stocks or bonds. The problem is that you have a huge, unrealized asset that most lenders will reject as too risky and too difficult to assess.
Selecting a financing partner that values your fees and includes that value in its lending format, provides you with the opportunity to double or triple the amount of financing you may be able to obtain elsewhere. As such, you’ll be fully resourced and confident that you have the optimum financing for your cases.
2) Someone who “gets it”
Not all law firm financing companies are created equal. You’ll be working closely with the funder throughout the financing process, so be sure to choose one with which you are comfortable. Picking a lender who has experienced the complexities of contingency fee practice will help you in numerous ways. One way to do so is to find a financing company that has plaintiffs’ attorneys on staff who are involved in the process. This allows them to better tailor the financing to your particular firm, caseload and structure. It also should provide flexibility with payment terms, since an experienced litigation funder truly “gets” delays in case resolution and should be able to modify your loan terms to accommodate the unexpected.
In addition, working with a staff of attorneys alongside the rest of your financing company’s team (underwriting committee, accountants, etc.) helps ensure your professional and ethical obligations are respected. They are already well-versed in these aspects, which helps eliminate the learning curve.
Choosing a financing company with a team of lawyers with significant legal experience has other benefits as well. The company will likely have years of expertise having valued hundreds, if not thousands, of cases and understand the complexities and challenges of contingent fee practice, such as delayed trials, discovery upsets, client and witness problems and unexpected results of motion practice. Being able to discuss your portfolio with a peer can be eye opening and serve to enhance your processes, including how you’ll deploy your financing.
In addition, the funder has likely built a solid network of contacts and will be able to connect you with respected co-counsel or reputable vendors, should the opportunity arise.
Selecting a financing company with a strong legal team on-staff can add value to your firm without adding costs. They can become a reliable source to help you navigate the ebbs and flows of a contingency practice. While only you control your cases, having a lender who can provide guidance during the financing process and beyond will truly advance your firm’s goals in ways traditional lending simply cannot.