Managing Contingency Cash Flow: Insights from Arias Sanguinetti

For contingency fee law firms, managing contingency cash flow is a persistent operational challenge, especially in highly competitive markets like Los Angeles. Firms must continuously invest in case acquisition, marketing, experts, and trial preparation to remain competitive, often long before any revenue is realized. The opportunity lies in building a financial strategy that supports that level of investment without limiting growth.

Watch the 4-minute video to hear how Mike Arias, Managing Partner of Arias Sanguinetti Trial Lawyers, approaches contingency cash flow and case costs at his firm to support long-term litigation.

Arias Sanguinetti has grown into a multi-office firm with dozens of attorneys and staff across California and Nevada. That growth, Mike explains, was driven by client need rather than a fixed plan. “We have grown now to where we are today, not by design, primarily by need,” he says. In a market like Los Angeles, that growth requires continuous investment in new cases and the resources to support them, increasing the complexity of managing cash flow as the firm scales.

Why contingency cash flow creates pressure for growing firms

The challenge begins with a fundamental mismatch between how contingency firms operate and how traditional lenders evaluate businesses. Revenue is not predictable, yet case costs, marketing, and operating expenses are constant and often significant. That mismatch is what makes cash flow management a daunting challenge for contingency fee firms.

“As we grew, one of the problems you have in traditional banking is they don’t lend to plaintiffs firms whose basic inventory is on a contingency fee basis,” says Mike Arias. He recalls conversations that consistently led to the same outcome. “There were banks that would send me emails or call me saying, ‘Hey, we’re a business bank.’ And I would tell them, ‘Yes, I’m interested, but here’s what I have, you know, as my business.’ And they say: ‘Oh, well, we don’t really, we don’t lend on contingencies.’”

At the same time, the cost of competing continues to rise. “Litigating cases, especially in California, is very expensive,” he says. In markets like Los Angeles, where competition for cases is high, firms must invest more aggressively in both acquiring and litigating cases. That combination increases pressure on how case costs are managed within the firm’s cash flow and how quickly firms can reinvest in new opportunities.

Planning for contingency cash flow in a competitive market

Because revenue is delayed, managing contingency cash flow requires deliberate planning, especially in a market where competition drives both volume and investment.

“Anybody that’s starting a practice, especially in an area like Los Angeles where it’s so competitive, you need to really think that through and make sure you plan for those,” says Mike. “Because there’s going to be times when your revenue is not meeting your expenditures.”

In this environment, plaintiffs firms are not only managing existing case costs but also making ongoing decisions about how much to invest in new case inventory and marketing to sustain growth. As firms scale, this becomes more complex. Larger dockets mean higher case costs, longer timelines, and greater capital demands, all of which must be managed without predictable revenue.

Creating a structure to support ongoing case investment

To manage this complexity, Arias Sanguinetti implemented a solution that separates case costs from operating capital. Using case cost financing from Esquire Bank, the firm has greater control over cash flow, allowing consistent investment in cases without disrupting day-to-day operations.

“One of the things I find really helpful is the [solution] that Esquire offers, which is the [case] cost line of credit,” says Mike. “I don’t have to worry about that now because I know that I have that in my cost line. And as I incur those costs, my cost line will cover those expenses.”

This separation allows the firm to maintain consistent investment in both case inventory and operations. Instead of tying up operating funds in case costs, resources can be allocated across salaries, marketing, and intake. “And that makes it really easy to spend your money, your operating funds on other areas within the firm, your salaries, your marketing, your intake, all those different areas,” he says.

It also supports the firm’s ability to take on larger, more complex matters without hesitation. “If I’m going to take on a massive piece of litigation, it could cost me a million dollars before it resolves itself,” Mike notes.

Responsiveness and flexibility in high-stakes litigation

Even with a strong structure in place, contingency cash flow needs are not always predictable. Firms need the ability to respond quickly when new demands or opportunities arise.

“When something happens that requires something apart from my traditional operating line or cost line [of credit], I call [Esquire Bank] up and I say, I’ve got this situation,” says Mike. “I need a 60-, 90-day bridge loan for this particular product or this project. And I will literally tell you, it’s sometimes within the day I get an answer. And that is amazing.”

That responsiveness enables faster decisions in active litigation and reinforces trust in the relationship. “It’s nice to have a bank that has a faith in you, which has given me the faith in them,” he adds.

Mike also emphasizes the importance of working with a banking partner that understands the realities of plaintiff-side work. “They understand what it means to be a plaintiff lawyer. They understand the reliance we’re going to have on their relationship with us into being successful and be able to fund these cases,” he says.

Supporting Growth Through Strong Cash Flow Management

For Arias Sanguinetti, managing contingency cash flow is not just a financial exercise. It is a core part of how the firm operates and grows, particularly in a competitive market like Los Angeles where sustained investment in cases and marketing is essential.

From planning for uneven cash flow to structuring how case costs are managed, the firm’s approach reflects the realities of contingency fee practice. It underscores the importance of aligning financial strategy with litigation demands so plaintiffs law firms can continue to invest in new opportunities, support existing cases, and maintain financial stability without disruption.

Watch the full video to hear more from Mike Arias on how his firm approaches contingency cash flow and case investment to enable long-term sustainability.