Managing Cash Flow Fluctuations to Scale Law Firm Growth

In this video blog, Danny Abir, managing partner of ACTS Law, one of the largest plaintiffs-only litigation practices in California, explains how he overcame the challenges hurdles of managing cash flow fluctuations by partnering with a bank that understands plaintiffs law firms.

Watch the video featuring Danny Abir.

For contingency fee law firms, the financial burden of litigating high-stakes cases can be as challenging as the litigation itself. Building a successful law firm requires business acumen and finding a banking partner that understands the long-term investment required to fuel wins while keeping the business operations running. As Danny Abir explains, “Conventional banks do not understand how a plaintiff practice is run. It’s as simple as that.”

The Frustration with Traditional Banking

Many plaintiffs law firms struggle to find adequate financial support from traditional financial institutions that simply do not grasp the unique nature of contingency fee litigation. Danny notes that many traditional banks view law firms through a rigid lens that doesn’t account for the reality of the litigation process.

With his previous bank, Danny recalls, “Every month I had to meet with the bank, and I kept explaining, explaining, explaining until I think a year into it, it fell apart, and we had to change banks.”

This lack of industry knowledge about how plaintiffs firms operate often leads to constrained credit lines or onerous personal collateral requirements that can hamper a firm’s ability to take on significant, high-stakes cases. As Danny points out, “The biggest challenge for plaintiffs lawyers is because the cases are all on contingency.” Months can go by without result while other months provide revenue. “So, your ability to manage your finances is very important,” notes Danny.

Managing Cash Flow to Fuel Growth

In the early days of the firm, Danny recalls that the self-financing route tied up significant money, making the firm the bank, an approach he does not recommend. He adds, “Unless you have some sort of a business savviness or you have a business partner that can actually help you manage that storm, you’re going to have problems.”

By partnering with Esquire Bank, ACTS Law was able to move away from the limitations of the traditional banking and self-financing. Instead of self-financing every expert and deposition, the firm gained the liquidity needed to invest heavily in their cases. Managing cash flow fluctuations became a collaborative effort rather than a constant source of stress.

Danny highlights the high expense of litigating, mentioning a recent case where they “accumulated over $1.3 million in case costs.” Having a line of credit allows ACTS Law to manage these “peaks and valleys” effectively. As Danny describes, “Some months you may need $100,000, $200,000, $300,000 to cover what the shortage is in order to make this even. I take it from the line of credit, I cover it. The following month, when that money comes in, I pay it off and it evens out.”

The Results of a True Partnership

At one point in his firm’s journey, Danny had an important revelation. He realized that “if instead of self-financing, we use a line of credit, we would be able to scale faster.” This shift in his approach to financing cases led to seeking out a new banking partner.

“We made the switch to Esquire Bank very early on because it was a no brainer. Esquire bank understands how a contingency practice is run and what are all the issues that a contingency practice faces. They have trial lawyers who actually look at the value of your cases. For the bank to actually take an interest in your business, to understand your business, that’s what you want in a bank.”

The banking partnership between ACTS Law and Esquire Bank has yielded transformative results, allowing the firm to focus entirely on client advocacy and expansion:

• The Ability to Scale: Access to capital allowed the firm to grow faster. “Year one after forming the partnership we did $1.8 million in fees. Year two we did $3.4 million in fees. The growth was exponential,” notes Danny.
• Alignment with a Banking Partner: “If I had to explain or describe my relationship with Esquire Bank, the word that I would use is symbiotic because it’s a partnership, it’s a business partnership,” says Danny.
• A Shared Goal: The relationship is built on a mutual understanding of the litigation timeline for plaintiffs law firms. “Esquire bank understands how a contingency practice is run and what are the different issues what are all the issues that a contingency practice faces. They have trial lawyers who actually look at the value of your cases,” Danny explains.

To learn more about how Esquire Bank can support your law firm’s growth, watch the video by clicking above.