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Funding for Attorney s and Law Firms
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For a moldova that practices contingent litigation managing cashflow is very important. Sadly managing ones income is an afterthought for most trial lawyers. Income is very sporadic because they only get money when cases are successfully concluded. With many cases taking several years to bring to conclusion projecting ones cashflow can be a daunting task.
Contingent firms typically advance every one of the cost of litigation upfront in substitution for a percentage of the recovery. In the contingent case a firm may invest countless attorney hours and tens of thousands of dollars right into a case. In case a firm loses a case it loses not only its time but the cash dedicated to hard costs too. It gets worse, a firm isn't allowed to deduct the money they have tangled up is case costs. Not only do they have to fund the money up front but they have to fund it with after tax dollars. They repeat the cycle and plow the fees from successful cases in to the next group of cases.
The missing ingredient in improving cash flow for most contingent law firms is something most businesses have already been utilizing for many years. Leverage. Most lawyers have funded costs out of pocket since they started, only because that's the way it has always been done.
A revolving credit line can be one of the most crucial tools inside a plaintiff lawyers fight for justice. By utilizing borrowed money to finance litigation expenses a company can eliminate the negative tax consequences of self funding. The firm actually realizes the income it is receiving in fees. Any interest a firm pays could be offset by having the money that was tied up just in case costs available for firm expansion or outside investments. But the biggest advantage has stopped being using after tax dollars to fund case development expenses.
We are in a time where trial law offices have more options than in the past when it comes to financing their practice, from traditional banks and specialty financial institutions to legal finance consultants. Contingent lawyers can and must pay attention to the bottom line if they desire to continue helping their clients.
Contingent firms typically advance every one of the cost of litigation upfront in substitution for a percentage of the recovery. In the contingent case a firm may invest countless attorney hours and tens of thousands of dollars right into a case. In case a firm loses a case it loses not only its time but the cash dedicated to hard costs too. It gets worse, a firm isn't allowed to deduct the money they have tangled up is case costs. Not only do they have to fund the money up front but they have to fund it with after tax dollars. They repeat the cycle and plow the fees from successful cases in to the next group of cases.
The missing ingredient in improving cash flow for most contingent law firms is something most businesses have already been utilizing for many years. Leverage. Most lawyers have funded costs out of pocket since they started, only because that's the way it has always been done.
A revolving credit line can be one of the most crucial tools inside a plaintiff lawyers fight for justice. By utilizing borrowed money to finance litigation expenses a company can eliminate the negative tax consequences of self funding. The firm actually realizes the income it is receiving in fees. Any interest a firm pays could be offset by having the money that was tied up just in case costs available for firm expansion or outside investments. But the biggest advantage has stopped being using after tax dollars to fund case development expenses.
We are in a time where trial law offices have more options than in the past when it comes to financing their practice, from traditional banks and specialty financial institutions to legal finance consultants. Contingent lawyers can and must pay attention to the bottom line if they desire to continue helping their clients.
