When planning law firm growth strategies, a key consideration is how to balance law firm cash flow and financial needs. Paying for case costs can be among the most challenging aspects of contingency fee litigation.

Overcoming the Uneven Cash Flow of Cases

For self-financed law firms, a large portion of the firm’s revenues are often locked up in litigation costs. The resulting impact can place the firm exposed to a financial “squeeze” if cases-in-process do not conclude favorably or on-schedule.

According to John Gomez, founder and president at Gomez Trial Attorneys, he experienced the strain on his cash flow during his early years as an attorney who self-financed his case costs.

“I was a little naïve back then and didn’t realize the variability of cash flow that comes with this business and the importance of having access to capital to effectively leverage this business,” he recalled.”

For John Gomez, the ups and downs of cash flow resulting from the unevenness of contingency fee law cases reminded him of an airplane that consistently swoops down and then climbs up, only to swoop down again.

What are the challenges of balancing cash flow and financial needs for self-financed law firms?

• As the law firm funds cases, liquidity reduces
• Cases take longer to settle – firms don’t get paid overnight
• Resulting impact causes a lack of available capital

Leveraging Case Cost Financing

While self-funding case costs may be a law firm’s preferred choice at a particular time, the pressure on capital tends to hinder growth initiatives. As John Gomez discovered, through case cost financing, a law firm can leverage the value of its case inventory to access solution-based credit facilities.

A case cost line of credit can help free up capital so that a law firm may invest in law firm infrastructure (hire attorneys, add technology, build brand through digital marketing) and growth initiatives.

Watch this 5-minute video featuring John Gomez, founder and president at Gomez Trial Attorneys, to learn how he overcame the ups and downs of managing law firm cash flow for cases, balanced his law firm’s needs, and unlocked capital for law firm growth through case cost financing.