Many new businesses don’t adequately prepare for success, and law firms are no exception. Getting clients is the primary focus for most, but you’ll need capital to get a case to court. So, how do you grow your business and benefit your clients if you have no capital? At FCA, we help law firms grow through tried and true strategies with law firm financing.

Why Law Firm Financing Is Essential for Growth 

Like any business, law firms have overhead costs, including payroll, rent, and utilities. If your firm handles personal injury litigation, you’ll also have other costs, such as investigatory services, court fees, and other disbursements. A short case with a quick payout is great, but what happens when your case drags on for months or years? How do you bridge the financial gap? That’s where law firm funding can help. 

Law firm financial planning can help improve your firm’s financial management and profitability by providing resources to sustain your business between payouts. Finding and utilizing law firm working capital gives you the financial flexibility to fight a fair fight for your client. 

Types of Law Firm Financing: Choosing the Right Fit

Law firm loans and litigation financing are straightforward ways to make legal action accessible to everyone. However, choosing the right financing for your situation can be tricky if you don’t know your options.

Law firm business loans

A law firm business loan from a bank or traditional lending institution is often the first option most people consider when looking for financing. These loans are traditional, so they’re seen as a trustworthy choice. However, they can be difficult to attain as they’re based on a credit check and your financial history. Depending on your situation, this can limit the amount available to you. They also require a strict payment plan that begins when you accept the loan. Without money coming in, you may not be able to keep up with the repayment. 

Attorney line of credit

Also called a law firm line of credit, this type of financing is non-resource capital. This means approval is based on your expected settlement proceeds instead of your credit history. As a line of credit, nothing happens until you start taking money out. You’re only charged interest on the money you use, and depending on the agreement, you may only need to pay the interest on the balance until your case closes.

Case-cost financing

Another financial strategy for a law firm is case-cost financing. This type of law firm capital involves borrowing a lump sum against your expected settlement amount to cover payroll, disbursements, and other costs. Your terms are based on the strength of your case and the anticipated settlement date. For example, a case with strong evidence and a near-close date carries less risk for the lender than a just-beginning case with weak evidence. 

Broker pre-settlement funding

As far as small law firm financing options go, this is one of the weaker choices. While brokers can provide legal funding, they’re not funding companies. They’ll get the loan for you and charge a loan origination fee and a 10% to 20% commission. 

Direct pre-settlement funding

Direct pre-settlement doesn’t use a broker. Law firms connect directly with a funding company to attain a loan against the anticipated settlement amount. FCA offers funding for most types of personal injury cases, including medical, product liability, automobile accidents, and more.  

Smart Financing Strategies for Law Firm Growth

Smart law firm growth strategies get you the help you need without drowning you in debt when the case closes. When you’re hunting for financing for your firm, consider these four factors before making a commitment: 

There are other facts attorneys should know about lawsuit funding that can greatly influence their choice. These include watching for terms with compound interest rates, high application fees, and hidden payoff tables. 

Another big pitfall is over-funding. While it may seem like all your prayers are answered when someone offers to lend you a large sum of money, it can end up costing you more than you can afford, leaving you even deeper in debt. The advance shouldn’t exceed 10% of the case settlement and should be just enough to get you through the lawsuit.

Law Firm Financing Resources

Law firms are limited to the help they can provide clients — they can’t provide them with an advance, but we can. This is often critical to sustaining your client through the settlement. If it drags on too long and they feel desperate, they may push for a lesser settlement so they can pay off medical bills and rent or mortgage payments. Help your clients by directing them to a reputable lender like FCA for non-recourse, no-risk funding. 

Build Your Firm 

FCA helps California-based law firms like yours get the help they need to build their business. When you’re ready to learn more about our law firm financial resources, visit our website or call our offices. Someone is standing by to help.