Attorney funding is a method of funding that is available to attorneys who are representing the plaintiff in a lawsuit. Other terms that refer to attorney funding include law firm financing, litigation finance, lawsuit funding, and legal lending. This is a special type of financing developed by legal experts specifically to help attorneys and their plaintiff clients be financially secure during the litigation process.
Legal funding is customizable for contingency fee lawyers whose incomes depend on their cases concluding or settling. The funding methods may be tailored to each attorney’s case, time frame needs, and budget. By using a financial lawsuit cash advance through legal funding, an attorney can more effectively prepare a winning case and help grow his or her law firm.
Why Do Attorneys Use Legal Funding?
When attorneys accept legal cases on a contingency fee basis, they sacrifice a great deal of money, time, and expertise to put together winning cases with no real guarantee of payment. In cases where a settlement is reached in favor of a defendant, the attorneys for the plaintiff end up with nothing for all their hard work.
Litigation is notoriously lengthy and is a very uncertain process. For example, a personal injury case typically has a life span of about two years from the time the complaint is filed until it reaches the settlement distribution point.
If that period of time seems long, take into consideration the fact that mass torts, multi-district litigation (MDL), and malpractice suits may take even longer than that. In cases involving minors, international entities, governments, or simply very large cases, it is not uncommon for settlements to take up to 15 years for completion. Waiting this length of time for an attorney fee can obviously cripple a lawyer financially.
Don’t Allow Delays to Ruin Your Law Practice
Good business practices involve and require a steady flow of capital. When fees for attorneys are extraordinarily delayed, it forces these legal professionals to undergo tremendous struggles to maintain a successful practice. Without incoming legal fees, which are the lifeblood of every thriving law firm, it becomes very difficult to maintain daily expenses, find new clients, and build cases.
The varying types of loans for attorneys are specifically designed to help fit the needs of independent practitioners and large firms alike. Because of these funding options, a contingency fee attorney can focus attention on important matters for clients instead of constantly worrying about paying office rent and utilities. When attorneys obtain an attorney funding advance, they can cover discovery costs, hire expert witnesses, maintain office expenses, and pay for administrative and advertising costs.
Why Not Get a Loan at the Bank?
Obtaining a traditional bank loan or line of credit (LOC) may be the route many small businesses take, but this may not be the best or most practical choice for attorneys. As part of the loan qualification process, banks run personal credit checks on applicants. This process can adversely affect attorneys because they are often running their firms as individuals and their individual credit is affected by business decisions. This can mean that they do not meet bank standards and, therefore, may not be approved.
It is normal for banks and other financial institutions to request some form of collateral like stocks, bonds, or real estate when approving a loan or line of credit. This requirement can present difficulty for attorneys who don’t have much collateral linked to their business, thus preventing them from meeting the qualifying standards. While it might be possible for attorneys to be approved by a bank for a loan, and even though a bank loan often has a lower interest rate than other financing options, the difficulty of the application process and the bank’s monthly payment requirements may be hindrances to many attorneys needing immediate capital.
How Does Legal Financing Work?
Legal funding differs from bank loans and a line of credit in two ways. First, legal financing was designed, from the application process to the distribution of funds, specifically for attorneys and clients. Second, legal funding is an advance, not a loan. All the money that attorneys obtain through legal funding advances will come from their own legal fees received in the future. Additionally, any money advanced to a plaintiff would come from the plaintiff’s future settlement award.
Legal financing agreements are made between a third party lender, known as a legal funding company, and a plaintiff’s attorney. To qualify for any type of legal funding, there must be ongoing litigation with a plaintiff and attorney or a case must have been recently settled for a funding application to be submitted.
Attorney-friendly Application Process
Designed with attorneys in mind, applications for legal funding are structured differently than ones for bank loans or lines of credit. Lawsuit funding companies do not ask for non-liquid collateral, which banks require for loans. Instead, attorneys and law firms may list future receivables as collateral, so case inventories count. The potential value of pending lawsuits or settlements matter to legal funding firms, and case inventories are accepted as proof that attorneys can repay advances.
As previously mentioned, personal credit checks are not required by legal funding firms to approve an attorney because funding advances are business expenses, not personal expenses. Attorneys are not personally responsible for the repayment of advances because any payments come directly from administrative accounts, attorney escrow accounts, or obligor accounts. Attorneys can usually receive the requested funding within 48 hours of the time the agreement is approved.
Types of Attorney Funding Available
Pre-Settlement Attorney Funding – When facing well-funded defendants like insurance companies, it may be very difficult for many attorneys to try a case with no access to legal fees. Attorneys who need capital to build a successful case may find pre-settlement funding to be the right option. With this lawsuit funding advance, lawyers can put resources into research, discovery, interviews, and travel.
Post-Settlement Attorney Funding – Even after a case has been decided, there may be a long wait before attorneys receive their legal fees. This can present a problem for the attorneys to effectively pursue new cases, maintain a successful law practice, and secure new clients. With this type of lawsuit advance, attorneys can access the necessary money to maintain and expand their practices.
Contact The Legal Funding Group Today
If your law firm requires financial assistance and security, The Legal Funding Group is ready to help. Call 912-777-3997 or fill out a quick and easy online application.
