As every legal professional knows, running a law firm costs money, but there are a few things to consider before applying for law firm funding. Even solo attorneys need cash for virtual office services, legal software, and litigation. Other expenses include office equipment, marketing, and business attire. But before you request legal funding for attorneys, learning the facts can help you make the right decisions and work towards the best possible outcome for the plaintiff.
Know How Much Money Your Firm Needs
When you apply for law firm funding, the lender doesn’t automatically know what you need. Every legal practice has different financial requirements. The amount you require to start and run your firm differs from other law firms. The location, legal specialty, and marketing expenditures of your practice are just some factors that determine how big a loan you might need.
Some attorneys start a law firm with just a few thousand dollars. Having a business plan helps you understand your financial needs and predict how much you might require in the future. Before applying for legal funding, look at ways to reduce expenditures, such as subscribing to virtual office services, using legal analytics to make informed decisions, and obtaining an online business insurance policy. Track your expenses so that you know exactly how much to apply for when the time comes.
Calculate Your Law Firm’s Revenue
Consider your firm’s gross revenue before applying for funding. This can vary based on many factors. Martindale-Avvo, a legal research firm, reported in 2019 that the average solo law firm took in $150,000 per year, while lawyers at small law firms averaged a revenue of $210,000.1
This pales compared to big-name law firms that make billions of dollars in annual revenue. However, business and operating costs determine if it’s enough. Regardless of your revenue, you want to make sound decisions and never cut corners. Also, scale your business accordingly and think carefully about how much law firm funding you really need.
Your Credit Score and Financial History Won’t Disqualify You
A lender will check your firm’s financial history before making an approval decision. Once you authorize a credit check, it will see your credit score and review your credit report. The higher your credit score the better, but a less-than-perfect score won’t disqualify you from approval. Nor will bankruptcies, active liens, judgments against your firm, or unpaid tax liabilities. Just be open about any issues and be prepared to explain them to any potential lender. Honesty is the best approach if you want the lender to weigh the merit of the case more heavily in its approval decision.
Funding Agreements Require Lenders to Be Paid Before Plaintiffs
Lenders often limit the amount you can borrow to a percentage of the expected settlement amount. Funding agreements also require their portion of the proceeds to be paid back before you can send the plaintiff the remainder. Once interest and fees are deducted, there may be less money than anticipated for the plaintiff and your firm. Always read the fine print before signing an agreement so you know how much law firm funding will cost you.
You Can Apply for Additional Funding
You can apply for lawsuit funding even after you took out a bank loan or financed your case in some other way. The lender may then put a lien on the collateral supporting the funding. Keeping both existing and new financing may require a new agreement in which liens and payments are prioritized. At Fund Capital America, we offer a cash advance refinancing program that simplifies the process and can reduce the amount you owe.
Lenders Require Basic Information Before Approval
Having the appropriate information ready can eliminate delays and reduce the risk of a denial. The law firm funding company will need details on your firm, practice area, and the cases you need to be funded. Gathering documents such as your current case list, financial statements, tax returns, budget, and other loan agreements can expedite the process and help the underwriter decide on an amount to offer.
Apply for Law Firm Funding with Fund Capital America
We provide hassle-free, non-recourse legal funding for plaintiffs and attorneys. In doing so, our company takes on the risk for you and can help increase your firm’s cash flow. Legal funding can cover your office and litigation expenses. There are no out-of-pocket costs or hidden fees and we’re paid back only if your case wins. To apply, fill out our online form and your law firm funding may be available within 24 hours. If you have any questions or need assistance with your application, call (855) 870-2274.
Source:
https://www.martindale-avvo.com/wp-content/uploads/Attorney-Compensation-Report.Final_.pdf
