Leveraging Debt to Invest in Marketing for Growth
In this blog, we feature insights into how to leverage case cost financing to invest in marketing for law firm growth.
By now, many contingency fee law firm owners are familiar with the practice of financing case costs through a Case Cost Line of Credit. This practice is becoming increasingly common in the legal industry, with a wide variety of vendors. The three most prevalent purveyors of case cost financing are: institutional commercial banks, litigation funding companies, and Esquire Bank.
Let’s take a closer look at the typical lending options for contingency fee law firms and some of the advantages and disadvantages.
Typical Lending Options for Contingency Fee Law Firms
- Commercial banks, also referred to as traditional banks, can lend at bank rates, but will treat contingency fee law firms like any other business. They don’t understand the contingency fee business model, nor are they equipped with the expertise to value a firm’s case inventory and lend against it.
- Litigation funding companies understand the contingency fee model, but because they’re beholden to demanding investors, they typically lend at high double-digit rates. This makes the cost of financing prohibitively high when considering an attorney’s ethical responsibility to their clients. Additionally, it may violate the rule noted below by Kevin Danesh, Founder and Managing Partner of BD&J, who uses it when assessing whether to take on debt to invest in marketing.
- A more flexible financing solution is provided through Esquire Banks’ approach to case cost financing. Founded by trial attorneys, Esquire Bank understands the unique business model of contingency fee law firms. Since it is a bank, Esquire Bank offers the advantage of financing at low, competitive bank rates along with the expertise to value a firm’s case inventory and the authority to lend against it.
Leveraging Case Cost Financing to Invest in Marketing: BD&J
Although most law firm owners are accustomed to using debt to pay for case costs, few have leveraged a Case Cost Line of Credit to invest in marketing. Even fewer know that they can get a customized Case Acquisition Line of Credit to specifically spend on marketing and growth.
Before using his Case Cost Line of Credit with Esquire Bank to invest in advertising, Kevin Danesh found himself in an all-too-familiar predicament. In the first five years of operation, BD&J reinvested all of its free cash into case costs and client advances. Millions of dollars became locked up instead of working to grow the firm’s business.
When BD&J partnered with Esquire Bank for a Case Cost Line of Credit, Kevin began to wonder what else he could do with the cheap and easy access to capital now available to him. Kevin extended his Case Cost Line of Credit and used a significant portion to invest in advertising.
Kevin’s Golden Rule
“Borrow money at a rate that is substantially lower than the ROI we get on advertising. If there is a clear margin between your cost of capital and your advertising ROI, then it’s a no brainer.”
By leveraging the capital provided through Esquire Bank, BD&J tripled its advertising budget. Noted Kevin, “Getting the money and deploying it in advertising had probably the single biggest impact on the trajectory of our growth.”
Watch this video to learn more about Kevin Danesh and his journey in building BD&J into a highly successful contingency fee law firm by leveraging debt to invest in marketing for law firm growth.
Meet with Esquire Bank
Learn how your law firm can finance its case costs and free up capital to invest in talent and growth. Schedule a no-obligation consultation with an Esquire Bank Business Development Officer today at a time convenient to your schedule.
For more on Esquire Bank’s expertise in providing tailored solutions for law firms, please visit Esquire Bank’s resources portal, Lawyer IQ, where you can learn about growing your business, financing for law firms, marketing strategy best practices, and more.
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