Starting and running a law firm costs a lot of money. Then there’s the financial weight of filing a lawsuit and proceeding until a personal injury client’s case settles. There are many financing avenues legal professionals can consider. But legal funding for attorneys and law firms can get around some tight financial corners.
Billable hours, clients’ fees, and settlement winnings aren’t predictable, so they shouldn’t be relied upon as consistent income. Law firms and attorneys can use various means to cover these costs, plus equipment, software, marketing, and administrative expenses. Compared to the following options, legal funding for attorneys and law firms has many advantages:
Financing a Law Firm
Law Firm Loans
Applying for a bank loan is often a complex, time-consuming process. And it can take a while to get approved. That doesn’t give your firm the working capital it needs now, because contingency fees won’t be obtained until the end of the case.
In addition, traditional lenders require paying back loans no matter the lawsuit’s outcome. Whether the case wins or loses, you’ll have to start paying off the loan principal plus interest right away. The bank or other lender may also require some form of collateral against the loan.
Increase Your Cash Flow
Understandably, you’re at an advantage if you can fund legal and business processes using cash flow. But this also has disadvantages. If you’re relying solely on cash flow, it may be necessary to pause marketing campaigns or freeze hiring. In taking these measures, you can hurt future business. Legal funding for attorneys and law firms ensures funds for ongoing revenue-generating activities are available.
Investing Personal Cash
Supporting your law firm with cash savings, home equity loans, or retirement funds can work if you have the financial means. It is also risky. Aside from the unpredictability of case outcomes and business trends, there can be tax implications. Seek the advice of a financial professional if you plan to use personal cash, and consider any other options they may suggest.
Use Revenue-Based Financing
With revenue-based financing, you’ll pledge a percentage of future revenues in exchange for the funds investors provide now. A percentage is established at the start of your agreement. The firm must pay back this portion of revenue until the original investment is paid back. While this arrangement can be established quickly, there are no alternatives to payback and you must stick to the payment plan. However, some financing firms will agree to payments based on monthly cash flows.
Use of Credit
Attorneys and law firms can leverage the convenience of credit. An unsecured line of credit can provide you with fast access to money. And it doesn’t always require the same payment structure as a small business loan. And like a credit card, you can borrow up to a set limit and pay your revolving balance.
Many small business owners use personal credit cards to fund their business expenses. While this can make you personally liable for debt acquired, credit cards often have lower interest rates than business loans and lines of credit. But like most other borrowing arrangements, you must pay a minimum amount each month regardless of caseload and settlement outcomes.
Other Types of Business Loans
Working capital loans may be useful if you can repay quickly. Small Business Administration loans have capped interest rates. A merchant cash advance doesn’t require collateral, as doesn’t accounts receivable financing. Working with a private equity firm can secure more financing than other means but may require giving up some control over the ownership or management of your firm. Therefore, prioritizing clients’ needs can be a challenge.
Why Legal Funding Stands Out
None of these options represent you or your law firm’s best interests when seeking fair compensation for your clients. Legal funding for attorneys and law firms is non-recourse. The only collateral is the proceeds of a future settlement. You can operate on a contingency fee basis and the costs of litigation and running your firm will be covered. And if a case doesn’t win, any funding received for it is not paid back.
Apply for Legal Funding from Fund Capital America
We can quickly secure legal funding for attorneys and law firms. Non-recourse lawsuit funding is often approved within 24 hours of receiving your application. The amount we offer is determined by the facts of your case, avoiding the costs and inconveniences of business financing. Whether it involves waging a bigger fight with insurance companies or going to trial, your firm can better serve personal injury clients.
Apply now or, to learn more about our legal funding options, call (855) 870-2274 today.
