Finding stable and reliable funding for yourself or your law firm can lead to ample amounts of stress, especially if your firm is relatively new. Getting started and to a place where your firm is financially thriving takes time, effort, understanding, and planning.
Many attorneys and law firms alike need some kind of funding at some point. Deciding on what funding to use can be overwhelming as there are so many great options available. Choosing to apply with attorney funding will provide you or your firm with the resources you need now and put you in a position to grow your business later on.
What Is Attorney Funding?
Attorney funding, also known as legal financing, is a cash advance given to attorneys by a third party. This money can be used towards a variety of costs such as:
- Court fees
- Gathering witnesses
- The firm’s expenses
- Salaries for employees
- Any overhead
There are many funding options available for attorneys depending on their financial needs and the circumstances of their case. The primary sources of funding that attorneys use are:
- Pre-settlement funding- This type of funding is for attorneys who have a pending case. Pending cases can be very financially draining so pre-settlement funding allows the attorney to receive a portion of their predicted settlement amount early to cover the costs of the case. This can be used to accommodate travel costs, witnesses, or any other crucial costs associated with the case. Pre-settlement funding provides attorneys with the confidence they need to pursue larger settlements for their clients.
- Post-settlement funding- This type of funding is intended for attorneys who are short on cases or clients. Post-settlement funding is a non-recourse loan, meaning that the borrower has the upper hand. The money given out for this type of funding goes to aid the attorney or firm in their pursuit of new clients.
- Voucher funding- This type of funding is available for attorneys who have worked either freelance or by contract for the government. The government can be slow to pay these attorneys, and it may be even more delayed because they are not consistent full-time government employees. Due to this, money can get tight. Voucher funding gives you the money you need as you wait for your delayed income. This isn’t a loan; once the money from the government finally comes through, the funding will automatically be paid back in full.
- Line of credit- Similar to banks, opening a line of credit requires collateral and a good history. Many funding agencies will not extend lines of credit for those who have become lax or delinquent with payments. Opening a line of credit is ideal for attorneys and law firms that are seeking advancement. Some forms of advancement could include creating a better marketing strategy, increasing their caseload, or bringing on new employees.
There are additional types of funding available for attorneys as well. Depending on the lawyer’s specialty or the type of case they are working on, they may be able to apply for:
- Commercial litigation funding
- Insolvency litigation funding
- Patent litigation funding
- Class-action lawsuit financing
- Law firm financing
- DIP financing
- International arbitration financing
- Securities and shareholder lawsuit financing
- Competition and antitrust litigation financing
You may be able to apply and receive additional or different types of funding simultaneously, depending on the predicted settlement amount of your case.
How Does Attorney Funding Work?
Typically, the amount that attorneys receive through funding depends on the projected winnings that they are trying to earn. Attorneys take a percentage of their client’s winnings, usually around 30-40%. If the projected earnings for a particular case are $500,000, the attorney will likely receive a percentage anywhere from $150,000 to $200,000. Based on these projected earnings, an attorney will get sizable funding if their case is likely to win.
Using Attorney Funding To Grow Your Law Firm
Having the money to grow your firm is different from knowing and using your money to your advantage. If your law firm has limited funds and is looking to maximize them, there are some financial tips to keep in mind:
- Hire at the right time- It can be tempting to want to hire a new employee when the work begins to pile up. However, it’s not a good idea to hire a new person to take on extra work if your budget is tight. Additionally, hiring a new employee takes a lot of time and effort that could be better spent in other areas for the time being.
- Outsource- Instead of hiring a full-time employee, it could be beneficial and financially beneficial to hire freelance or contract workers. While it will require work to go through the hiring process, if it is necessary to add someone to the team, adding a part-time employee is more cost-effective than taking the time to find a full-time employee that is ideal for your firm.
- Invest in marketing- Marketing is a great way to promote your law firm and attract new clients. Investing and hiring someone to create a navigable and sleek website for you will help you come off as more professional and in touch. You may also want to focus on a social media platform to continue your law firm’s marketing and promotion. Additionally, strategies like implementing Search Engine Optimization, or SEO, practices on your website will appeal to search engines like Google and Yahoo and further push your law firm to the top of the search results. If learning this strategy seems complex you may also hire an advertising company to do this for you.
There are many useful ways to spend legal funding and have it make your law firm more money. Spending your money with a plan and using every resource available to you will maximize your profits and help promote your law firm at the same time.
The Legal Funding Group is a trusted and reliable legal funding agency for attorneys and plaintiffs alike. If you or your firm is looking for flexible funding, fill out an application on The Legal Funding Group’s website today.