Why Lawsuit Funding Is Important For Many Start-Up Law Firms

date: 04/03/2012

Most people assume that lawyers live extravagant, lavish lifestyles. They have a well-paid job, fulfilling work, and a prestigious perch in society. In reality, this is an inaccurate picture of the lives most lawyers actually live, especially plaintiff attorneys that work on a contingency fee basis.

Many lawyers are just regular people going through the day to day struggles like the rest of us. Those that start their own firms usually have it especially hard. The prestigious and expensive education paid for mainly through student loans is still on their back. Not to mention starting a law firm is not easy with expenses like rent, advertising, employee salaries, expert witnesses, subscriptions, association fees, insurance, and numerous others.
 
Starting a business is an expensive venture, and a law firm is certainly no different. There is only so much money you can borrow from family and friends. You can take on partners who have money, but you are giving up a significant portion of the company and its proceeds.

Ultimately, it is almost impossible to start a law firm without taking on a heavy load of debt. The traditional route for most lawyers is the bank. They write up a business plan, go to the bank, and meet with the loan officer who will evaluate the attorney’s background and financial status.
 
Many young lawyers do not have sufficient credit to qualify for a loan. Those that are fortunate enough to qualify for a loan can still face financial duress, as the line of credit established by the bank is often not sufficient to cover the necessary costs of running a law firm.

This is where specialty litigation finance companies come into play. They can provide what is known in the legal financing industry as attorney post-settlement funding (also known as attorney fee financing). This is where the litigation financing company purchases an attorney’s settled legal fees at a discount, providing the lawyer with working capital that would otherwise take months or even years for them to receive. This allows attorneys working on a contingency fee basis to continue building their practice with minimized stress of financial downfall.


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