Litigation Finance For Shop Law Firms

August 16, 2015 Nemes Finance

Ed. note: This short article is part of a weekly column from Lake Whillans Litigation Finance devoted to resolving typical questions that emerge in connection with office litigation finance.

A number of months ago, I described how litigation financing can be used by entrepreneurial litigators at huge law firmslaw practice to develop sustainable, high-end litigation practices outside the standard route of cultivating relationships with the largest corporations and their general counsel.

Many of the same challenges that I talked about facing young partners at huge law firmslaw practice manifest more acutely at emerging law firmslaw practice attemptingattempting to sustain and grow a business as they draw in new customers, build brand awareness, manage incomes, and generally keep operations.

Attracting new large business clients (the kind of companies that have fairly unconstrained litigation budgets and are readyagree to accept the per hour rate billing structure) can be hard when contending directly with more recognized Biglaw firms that often have relationships with corporations that stretch back over years. However, developing a practice that targets business that have monetary constraints can need a law companya law practice to represent the customer on either a contingency fee or decreased costs with a success premium. These designs can put an unpleasant quantity of strain on a shop law company that should designate resources to operations.

Unlike other emerging businesses, law firmslaw practice are constrained in the method in which they grow. Law firms can not raise equity from investors (due to expert rules of conduct which prohibits lawyers from sharing charges with a non-lawyer). This produces a limiting capital structure as law firms can only count on company revenues and financial obligation facilities (which normally need regular payments) to money daily operations and take advantage of growth opportunities. A profile of contingent cost cases, which does not produce frequently repeating earnings, is troublesome for boutique companies that require regular monthly income to continue operations which can not access equity financiers to profit from growth opportunities. Even more, taking a case on an alternative charge structure produces straight-out danger to the financial stability of the company as millions of dollars can be invested in a single case with the hopes of a large payout in the future. If unfavorable files emerge in discovery, or witnesses perform improperly under assessment, the future of the company can be rapidly tossed into risk.

Litigation financing companies, such as Lake Whillans, can be beneficial for discovering a more stable growth trajectory. Litigation funders can supply a boutique law company’s financially constrained clients with funds to pay the law firmlaw practice on a hourly (or hybrid, if the law firm and customer prefer) billing structure, permitting the law company to get routinely recurring earnings to strengthen its development, and for the customer to get the same (or much better) economics than it would have gotten had it employed a contingency fee lawyer. Litigation financing companies can likewise give capital for clients’ operating requirements, providing amounts above the required fees and expenditures to prosecute the case and put the customer’s business on a steadier course. Lastly, litigation funders can likewise be a source of capital for the boutique companies themselves.

As always, we are delighted to discuss this topic in additional information. Feel complimentaryDo not hesitate to email me at:�drucker@lakewhillans.com!.?.! Lee Drucker is principal at Lake

Whillans, a national litigation finance and distressed endeavorequity capital company. He can be reached at drucker@lakewhillans.com.

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