2 Minute Video

Finance

Understanding Typical Lending Options for Contingency Fee Law Firms

Understanding typical lending options and how they can impact law firm growth and cash flow is essential for contingency fee law firms. In this blog we outline the three paths typically followed by trial attorneys and where they tend to fall short.

For contingency fee law firms, the ebbs and flows of a firm’s cash flow, the unpredictable timelines for settlements, coupled with rising case costs, make financial planning critical – especially in times of inflation and potential recession.

Taking a Familiar Path: 3 Typical Lending Options

To meet the demands of funding litigation costs and firm operations, many trial lawyers typically look to three lending options: self-financing, traditional bank lending, or litigation finance companies. However, each option tends to fall short due to drawbacks, trade-offs, or compromises.

With self-financing, the cost of financing case costs becomes a burden assumed by the partners out of their own pockets. While on the surface, pursuing a debt-free path may seem sound, it can be highly limiting for law firm growth by tying up significant amounts of capital for years, as well as proving to be an ineffective use of after-tax dollars.

Another approach is to obtain a loan or a line of credit from a traditional bank. While this financing method can provide credit facilities at bank rates, traditional banks won’t use case inventory as collateral. In addition to primarily reviewing a firm’s past performance as a basis for financing, traditional banks tend to require annual clean-up provisions and place onerous covenants on the firm’s partners.

A third approach, utilizing litigation financing companies, may offer law firm a more significant line of credit and use case inventory as collateral, but at a much higher interest rate, excessive fees, and greater cost to the firm. Additionally, longer case durations will impact and reduce the firm’s cash flow.

While these typical lending options sources may meet some aspects of a law firm’s financing needs, in the long run, they tend to lead to frustration, an inability to scale growth, and decreased liquidity.

A Fourth, More Effective Option

Fortunately, there are more flexible, financing solutions provided through a customized approach to each law firm’s needs, that provide capital to run a firm’s operations and capital to fuel growth. Esquire Bank understands the unique business model of contingency fee law firms and can provide expanded access to capital based on a firm’s contingent case inventory and at low, competitive bank rates.

Click above to watch the 2-minute video featuring a detailed discussion of why understanding typical lending options and how they can impact law firm growth and cash flow is an essential consideration for contingency free law firms.

Download the “Typical Lending Options” Infographic

Learn about “Typical Lending Options for Contingency Fee Law Firms” and the value of Esquire Bank’s case cost financing solutions, click below to download

DOWNLOAD INFOGRAPHIC

Looking to Learn More About Law Firm Growth Strategies?

Download the eBook now, “5 Best Practices from Law Firms That Are Growing and Succeeding Boldly,” to get your hands on our top strategies for achieving exponential growth.

Download eBook

Financing Solutions Tailored to Your Law Firm's Needs

Discover how leading contingency fee law firms are succeeding with financing solutions from Esquire Bank. Learn how your law firm can leverage its contingent case inventory to gain access to capital so you can invest in key business areas and drive sustainable law firm growth.

 

Meet with Esquire Bank

  • Life Cycle Stage: Educated - Product Solutions
  • Content Tier: bronze
  • Content Type: video

Password Reset Complete

Please log in with your email and new password to continue.

If you don't have an account, create one.

By providing your email, you agree to our terms and use.

Join LawyerIQ to read the full article

Enter your email address to register for a free LawyerIQ account. This ensures we only recommend content you’re interested in based on your preferences.

If you already have an account, log in here.

By providing your email, you agree to our terms and use.

Join LawyerIQ to watch the full video

Enter your email address to register for a free LawyerIQ account. This ensures we only recommend content you’re interested in based on your preferences.

If you already have an account, log in here.

Join LawyerIQ for free and get access, to Platinum content

Enter your email and register for a free profile. This will help us suggest more content you may be interested in based on your preferences. With Platinum access you’ll enjoy:

If you already have an account, log in here.

By providing your email, you agree to our terms and use.

Welcome back to LawyerIQ

Enter the email address associated with your account to log in.

Forgot your password?

If you don't have an account, create one.

By providing your email, you agree to our terms and use.

Join LawyerIQ for free and get access to Platinum content

Enter your email and register for a free profile. This will help us suggest more content you may be interested in based on your preferences.

Guest Users Receive:
  • Access to limited content
LawyerIQ Members Receive:
  • Up-to-date insights on industry trends and your specific interests
  • Tailored content shared directly to your personalized dashboard
  • Content updated frequently as industries and/or trends evolve

If you already have an account, log in here.

Help us improve your LawyerIQ experience

Choose all that apply.

What topics are you most interested in?