Four Ways Law Firms Can Use Litigation Finance
Expanding beyond the traditional scope of single case funding is a key priority for many litigation funders across the globe, with both portfolio financing and law firm funding becoming a key part of these business models. When it comes to discussions of law firm financing, it can often seem as if this is a broad and nebulous term, but there are several ways which law firms can benefit from, and make use of, third-party funding. In a blog post from Omni Bridgeway, Naomi Loewith, director of strategic partnerships – Canada, offers an overview of four ways that law firms can take advantage of litigation finance to grow and strengthen their businesses. Firstly, Loewith raises the common issue of firms who are burdened by large sums of unpaid WIP matters, where clients have been unable or late in paying their bills. In such scenarios, outside funding can be a useful remedy, benefitting the client who can now alleviate financial obligations, and ensuring that the firm is able to continue acting in these cases whilst still ensuring cash flow. Outside of clients failing to pay their bills, Loewith also raises the opportunity for firms to expand their businesses by acquiring a new line of business. Funders can provide the capital to kickstart these new operations until they are self-sustaining, with the additional benefit that funding requires firms to repay only once revenue is being generated. As a third use case, Loewith highlights that as law firm mergers are expected to increase in frequency post-pandemic, a firm that uses portfolio financing can demonstrate to partners that it has guaranteed revenue and a lower risk portfolio. This pre-existing financing option can make the merger process more efficient and even position the firm as a more attractive merger target. Finally, Loewith suggests that for those firms looking to geographically expand, the same kind of portfolio financing can act as a powerful catalyst to support expansions which are naturally capital intensive. As with the previous examples, third-party funding can provide the needed financing without forcing the firm to take on more debt.