Articles
How to pay for expanding your firm
- Options
- Pay with the firm’s current net cash flow
- Pros
- a. Easy
- b. Traditional method for paying for expansion
- Cons
- Ties up liquidity
- Expensive (i.e. lost opportunity cost)
- Tax burden due to using after tax dollars
- Growth limited to firm’s cash flow
- Borrow from a traditional bank
- Pros
- Limitless source of capital
- Current relationship-Operating & Trust accounts
- Frees up liquidity
- Cons
- Timely principal and interest payments required irrespective of cases settled
- Expensive-Firm “eats” the interest even though its for the benefit of the client
- Growth limited by firm’s ability to make timely payments
- Banking consolidation can mean new approach to lending to attorneys
- No value placed on contingent receivables
- Smaller lines because banks lend off cash flow or balance sheet
- Refer business to other attorneys
- Pros
- Easy
- Goodwill with other attorneys
- Cons
- Very expensive (giving up anywhere from 50-90% of the fees)
- Weakens your firm and strengthens your competition
- What to Look for in a Financial Partner
- Understands the unique characteristics of trial law firms.
- Uneven cash flows
- Client advances are contingent loans
- Large capital requirements required to prepare cases for settlement
- Program tailor-made for trial law firms
- Easy to use
- Inexpensive
- Limitless source of funds
- The Perfect Program
- Easy to use
- Large line
- Bank doesn’t underwrite individual cases
- Interest passed through to client
- Payments due only as cases settle
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