After more than a decade in the attorney funding business, Case Funding Inc. has been witness to the changing landscape of the legal profession, particularly the growing imbalance between the level of financial resources of plaintiffs’ attorneys and large corporate defendants. This gap is closing as more and more plaintiffs’ lawyers become aware and take advantage of litigation financing. Case Funding serves to help lawyers navigate the world of legal finance so that they can find the right solutions and make informed decisions for their firms’ financial future.
How Legal Finance Works for Contingency Based Law Firms
Also known as litigation or legal financing, litigation funding, third party funding and alternative litigation financing (ALF), litigation finance is the method or process by which law firms finance their litigation or case expenses through a third party funding company (TPLF). While traditional lenders are unable or unwilling to offer loans secured by contingency cases, lenders that specialize in loans for lawyers have filled the void in recent years.
A Typical Law Firm Loan:
- Is a loan to the Law Firm and requires the personal guaranty of the Firms’ principals
- Loan amount is cash flow driven
- Monthly payments include interest and amortization
- Full security interest in all recovery assets is granted to the Lender
- Annual Repayment is required
- An Annual Renewal Fee
Legal finance companies like Case Funding are better able to serve attorneys than traditional banks due to their knowledge and experience in law firm financing. They know how to manage the risks involved with using cases as collateral – and have become experts in determining case value. Factors taken into consideration when a lender decides to accept an attorney’s case as collateral may be the type of case, case stage, its merit, expected settlement value/settlement timing and numerous other variables. Specialty Legal Finance Lenders must have an intimate knowledge of the practice of law, industry trends, and accurate foresight derived from experience.
The Case Funding Inc. Model:
Case Funding has developed several tried and true loan solutions specifically for Law Firm Borrowers. Typical Case Funding Inc. loan terms include:
- Amounts borrowed range from $25,000 to over $1 million and there are no restrictions on how funds can be used to support your business
- Loan amount is based on several factors including: the fees that the firm is expected to generate, the financial strength of the firm and the credit profile of its principals
- Includes monthly payments covering a portion of the interest due
- Repayment of the loan occurs as cases settle and fees are received
Typical Uses for Law Firm Financing
Like any other business, Law Firms need to borrow funds for working capital. This encompasses ordinary overhead expenses such as rent, wages, case and trial costs, as well as marketing and more. With the availability of specialty legal lenders, contingency based Law Firms are no longer solely reliant on capital contributed by its Partners. The availability of adequate financial resources for working capital allows attorneys to inject their firm with funds during the common cash flow peaks and valleys of their case settlement cycles.
Law firms who specialize in Class Action or MDLs and require a deep pool of financial assets upfront often use loans for Business Development to acquire and manage leads. Firms can finance an awareness blanketing marketing program and arrange for legal services to be performed on a mass scale for their large basket of cases.
Personal Injury lawyers often use a loan to finance case and trial costs such as better expert witnesses, trial exhibits, ‘day in the life’ videos, medical chronologies and other expenses as needed to mount a stronger case. Attorney loans allow them to recapture capital held up in active late stage cases and invest in early stage cases, ultimately contributing to a more even and predictable cash flow in the long run. Litigation financing can also help attorneys retain a higher portion of their fees by retaining rather than having to refer out cases during a cash flow crunch.
In our next installment, we’ll delve further into the Benefits and Uses of Legal Financing with:
- How to finance Case Costs – One-Stop Shop for Litigation Financing
- Retain vs. Refer – How to keep cases in-house
- Never Settle for Less – How to avoid pre-mature settlement
- Great Experts = Great Cases – Borrowing for cases costs less than you think
For questions specific to your Law Firm, contact Richard or Leon at (888)-248-2866 or make an appointment online.
Case Funding Sponsors The American Association for Justice (AAJ)
Case Funding Inc. is a New York based specialty finance lender and industry leader in providing litigation funding solutions to attorneys, law firms and personal injury and product liability victims. Working capital loans enable attorneys to invest in their cases and pay for items such as expert witnesses and litigation support costs, operating expenses, business development and marketing campaigns and better manage cash flow overall. Case Funding factors and purchases medical liens from doctors, surgery centers and radiology centers. Selling or factoring medical liens allows medical providers to immediately improve their cash flow, reduce overhead and eliminate bad debt risk while providing attorneys with the security that their plaintiffs will receive necessary medical care throughout the duration of their lawsuit. Plaintiffs can receive funding for personal and other living expenses while they wait for their case to settle so they aren’t pressured into settling their case for less than its full value.