In my 30+ years of experience as a practicing attorney and the founder of a litigation finance company, I've witnessed firsthand the unique paradox facing contingency attorneys: success on paper doesn't always translate to operational stability. Today's economic landscape has intensified this challenge, creating what I consider a perfect storm for law firm cash flow. I'd like to share my observations on these multifaceted pressures and explore strategic solutions that have helped hundreds of firms navigate these turbulent financial waters.
For contingency-based law firms, success manifests in an ever-growing portfolio of meritorious cases. Each represents a significant potential asset, but the timing of realization remains unpredictable. Unlike traditional businesses with regular revenue cycles, contingency practices must manage substantial operational expenses while receivables remain in limbo for years.
I've seen highly successful firms with millions in expected future receivables struggle to meet monthly overhead, fund case expenses, or invest in growth opportunities. For attorneys facing this challenge, it’s ironic—your practice becomes increasingly valuable on paper while facing mounting cash flow constraints in daily operations.
Several concurrent market developments have exacerbated this long-standing challenge:
1. Insurance Company Delay Tactics
Insurance carriers face unprecedented financial pressures of their own. Natural disasters in Florida, California, and elsewhere have triggered billions in claims. Simultaneously, many carriers are experiencing portfolio devaluations in volatile markets. Their response has been predictable: intensify delay tactics.
I frequently remind the attorneys I work with that insurance companies are fundamentally in the business of collecting premiums, not paying claims. When their own liquidity is threatened, they double down on delaying legitimate settlements.
This manifests in increasingly protracted negotiations, expanded motion practice, and reduced settlement offers—all aimed at extending the timeline to payment. For contingency firms, these tactics directly impact cash flow at precisely the time when operational stability is most crucial.
2. Credit Market Contraction
As interest rates have risen and lenders have grown more cautious, traditional credit options for law firms have contracted significantly. Traditional bank lines of credit—once a reliable stopgap for contingency practices—have become more difficult to secure and maintain.
I’ve observed in recent months that we are seeing an across-the-board tightening of credit standards. Lenders increasingly view contingency receivables as speculative, despite strong historical performance data.
The result is a credit environment where even established firms with excellent case portfolios struggle to secure operational financing.
3. Extended Case Timelines
Court backlogs, which expanded dramatically during pandemic-related closures, continue to plague the judicial system. Civil cases face unprecedented delays in reaching trial dates, with some jurisdictions reporting 24–36-month backlogs.
These systemic delays extend the timeline to resolution for even the most straightforward cases. This creates additional pressure on contingency firms' already stretched cash positions.
Beyond operational stress, cash flow constraints create strategic vulnerabilities. Firms operating from positions of financial necessity often find themselves forced into suboptimal settlements.
I've seen it countless times in my conversations with firm partners across the country: when operational pressure mounts, even the best attorneys can find themselves accepting discounted settlements simply to maintain cash flow. This not only reduces firm profitability but can impact client outcomes.
This vulnerability becomes particularly acute when facing well-capitalized defendants who recognize and exploit cash flow pressures during negotiations. This asymmetry creates a systemic disadvantage for contingency practices regardless of case merit.
As traditional financing channels have contracted, alternative solutions have emerged to address the unique challenges facing contingency attorneys. These innovative approaches recognize the value of contingency receivables while providing immediate liquidity.
Litigation finance has evolved from a niche offering to a sophisticated solution for law firm liquidity management. Companies specializing in legal finance now offer several structures that allow firms to convert future receivables into present capital:
Case Advances
These structures provide immediate capital against specific cases or case portfolios. Unlike loans, many are non-recourse, meaning firms only repay if the case succeeds. This significantly reduces risk compared to traditional debt.
Attorney Fee Purchases
More evolved than simple advances, fee purchase agreements involve the actual sale of a portion of expected attorney fees. This provides immediate liquidity without creating debt on the firm's balance sheet—a crucial distinction for practices managing cash flow challenges.
Portfolio Financing
For firms with diverse caseloads, portfolio-based financing aggregates expected recoveries across multiple matters. This approach provides more flexible capital while distributing risk across the entire portfolio rather than individual cases.
What makes these solutions particularly valuable is their alignment with how contingency practices operate. Unlike traditional banking, which tries to fit contingency firms into conventional lending models, litigation finance is designed specifically for the unique economics of contingency practice.
Financial experts emphasize that litigation finance solutions provide the greatest benefit when implemented proactively rather than reactively. Firms that incorporate these tools into strategic financial planning can negotiate more favorable terms and maintain stronger negotiating positions with both financing partners and case opponents.
As I’ve advised practice leaders, the firms gaining the most advantage are those using litigation finance as part of a comprehensive cash flow management strategy. They're securing liquidity before immediate needs arise, which preserves optionality and negotiating leverage.
This proactive approach stands in stark contrast to crisis-driven financing, which often comes with less favorable terms and limited options.
Consider the experience of a mid-sized personal injury firm in the Southwest. Facing extended delays in case resolutions and increasing pressure from insurance carriers, the firm implemented a phased litigation finance strategy:
“We went from constantly worrying about next month's overhead to focusing exclusively on maximizing case values,” the managing partner reported to me. “The psychological shift was as valuable as the capital itself."
The cash flow challenges facing contingency attorneys today require a fundamental reframing: What appears as a liquidity problem is an asset utilization opportunity. The substantial value locked in contingency receivables represents a significant resource that, properly leveraged, can transform operations and outcomes.
What I consistently tell attorneys facing these challenges is that forward-thinking firms are increasingly recognizing that uncertainty of timing doesn't diminish the underlying value of well-developed cases. By partnering with financial entities that understand and properly value these assets, these firms are converting future expectations into present capital—creating operational stability while maintaining the strategic patience necessary to maximize case values.
In today's challenging economic landscape, this approach represents not merely a survival tactic but a strategic advantage that positions firms for sustainable success regardless of market conditions.
Roni Dersovitz, Esq. is the founder and CEO of RD Legal Funding, a pioneer in providing innovative liquidity solutions for contingency law firms. To learn more about strategic options for your practice, visit or contact us at info@legalfunding.com or (800) 565-5177.
