Why Access To Financing Is Critical For Law Firms

By Author: Kevin M Janes
Total Articles: 5
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But this is an inaccurate picture of the lives most lawyers live - especially plaintiff attorneys who work on a contingency fee basis.Lawyers experience the same day-to-day challenges as the rest of us. Those that start their own firms face the same challenges and fears as any new business owner.Contingency based law firms need to prepare for significant negative cash flow as they build their case load, spending on case costs including expert witnesses and general operating expenses while they wait for revenue from settled cases. Founders of new law firms are already saddled with debts from an expensive education, often paid for with student loans. They have operating expenses such as rent, advertising, salaries and benefits, subscriptions, association fees, and insurance. Add it all up and it's almost impossible to get off the ground. While there is only so much money you can borrow from family and friends, you can always take on partners who may have money - but if you do, you're likely giving up a significant portion of the company. It's virtually impossible to start a law firm without taking on debt in some form.Banks ...
... were the traditional source of loans for lawyers starting up. Lawyers would write a business plan and meet with the loan officer who would evaluate the attorney's background and financial profile. Unfortunately, most banks no longer lend to trial lawyers who work on contingency. They don't have the expertise to evaluate lawyer's most valuable assets - their cases - and they're under pressure from regulators to divest their more "risky" loans.But there is a viable answer for lawyers, young and experienced, who are establishing a new firm or partnership.The Legal Funding industry has experienced rapid growth in recent years, due in part to the void left by banks and the establishment of highly specialized legal finance firms.Legal Finance firms provide what are known in the industry as working capital loans and lines of credit for law firms. Firms pledge their cases as security for the loan and pay it off from the proceeds of their cases as they settle. Lawyers can also pledge their own personal credit. Lenders lend against cases not yet filed, those in trial and cases that are on appeal. The funds can be used for practically any purpose including general operating expenses, business development and marketing as well as for expert witnesses , litigation support and partner distributions. Loans are typically two years (or longer) but can be paid off at any time. In essence, the lawyer is getting an advance on their fees and reimbursable expenses.While the practice has grown, there are still only a handful of quality lenders with the expertise and capital to service the legal community."Legal Funding is a valuable resource for law firms in start-up mode or just experiencing choppy cash flow," noted Richard Silverstein, President of Case Funding Inc., of New York, one of the few specialty legal finance companies that are able to provide attorney and legal funding to contingency fee based law firms across the United States. "We ensure attorneys have the capital they need to properly mount their cases against well financed defense firms and deep pocketed defendants. With our capital, they're not forced to settle early or for less than the case is potentially worth. I like to say - we level the playing field for the little guy".Case funding provides legal funding and attorney funding solutions.