Funding for Attorneys and Law Firms

It is vitally important for a law firm that practices contingent litigation managing cash flow. For most trial lawyers sadly managing ones cash flow is an afterthought. When cases are successfully concluded cash flow is very sporadic as they only get paid. Cash flow can be a daunting task with many cases taking years to bring to conclusion projecting ones.

Attorney financing is a convenient way. In exchange for a percentage of the recovery contingent firms typically advance all of the cost of litigation upfront. In a contingent case a firm may invest tens of thousands of dollars into a case and hundreds of attorney hours. It loses not only its time but the cash invested in hard costs as well if a firm loses a case. The money they have tied up is case costs is not allowed to be deducted by a firm, it gets worse. They have to fund it with after tax dollars but not only do they have to fund the money up front. Then they plow the fees from successful cases into the next group of cases and repeat the cycle.

Something most businesses have been utilizing for decades is the missing ingredient in improving cash flow for most contingent law firms. Only because that's how it has always been done most lawyers have funded costs out of pocket since they started.

One of the most important tools in a plaintiff lawyers fight for justice a revolving line of credit in attorney funding. By using borrowed money a firm can eliminate the negative tax consequences of self funding to fund litigation expenses. The income it is receiving in fees is actually realized by the firm. By having the money that was tied up in case costs available for firm expansion or outside investments any interest a firm pays can be offset.