You’ve done some research on what’s out there for law firm financing, but how do you make the decision that’s best for your firm?
What is driving you to seek financing in the first place should play a major role in determining which lender to partner with and what specific financing product to choose.
These are some of the more common reasons plaintiffs’ firms seek funding. If you find yourself able relate to some or all of them, it may be time to consider speaking to a lender to find out what type of lending best suits your needs.
- High litigation costs
The business model for contingent-fee law firms results in relentless financial pressure, with up-front case costs that can seem endless when preparing a case for trial. You want to build the best case for your client and doing so is expensive. By the time you hire expert witnesses, pay for medical records and a physician to interpret them, create hi-tech visuals to support your version of the facts, you could find yourself under significant financial duress. Worse, should the case be lost, you won’t receive any revenues to help reimburse those expenses.
Specialty lending can ease the burden of carrying these costs. While there are options available to fund one specific case, that may present a higher interest cost and you will need to apply for funding each time a new case is being prepared for trial Alternatively, you may investigate a revolving line of credit where funds are loaned against your entire portfolio to help even out your cash flow as you manage multiple cases at the same time.
- “Puzzle-piece” resources
Starting or running a law firm takes a substantial amount of capital, as does any business venture. If you find yourself subsidizing your firm through many different sources, it may be time to consider consolidating your resources.
Being able to self-finance can be a sticking point, or a point of pride, for some attorneys. Profits, credit cards and leveraging home equity are common strategies for many as well. But as the legal world evolves, it’s becoming increasingly important to have a reliable, steady source of funding.
Working with a litigation funder who can provide one source of working capital to be used for all your law firm expenses can be key to keeping things running smoothly. Plus, it eliminates the pressure that can come out of using “friends and family” money and cuts down on the stress of carrying high credit card balances.
- Caseload growth
If you are looking to grow your firm’s portfolio or expand into new litigation, you’ll need cash to do it. Advertising for new cases or purchasing inventory from another firm can snowball into a larger expense than you may have anticipated. A lender who can be flexible as your needs change, and who can adapt quickly to your situation, is key. Where a bank can provide one set amount of financing, a specialty lender can adjust your facility as both your needs and your case portfolio change.
- Practice expansion
Perhaps you are looking to expand by absorbing another firm or adding a new office location to expand your firm’s jurisdiction. A funder can work with you through this process to ensure that you have the supporting financing to make the transition as seamless as possible. This could quite literally be the difference between success and failure. With consequent hiring of new staff or advertising that often accompanies such a change, having financing to keep your firm nimble to adapt to rapidly changing needs is crucial to succeeding.
The bottom line is your firm’s specific needs play a large role in that path to financing that you select. Examine these obstacles carefully and choose the solution that best alleviates the pain point you are seeking to address. The biggest perk to working with a litigation-financing expert is that they have a thorough understanding of the ins and outs of running a contingent-fee firm. If other stumbling blocks appear, they are flexible and understanding enough to help you navigate.