An increasing number of firms are seeking law firm finance solutions to help drive business development and growth, and to allow them to move more quickly to support clients.
Woodsford has an in-depth understanding of the financing of law firms, particularly those with a substantial amount of claimant litigation and arbitration work. We work with leading law firms to deliver a range of funding options that enable effective cash flow management, as well as managing and mitigating risk.
Law firm finance solutions don’t have to be about funding specific litigation or arbitration cases. They can also act as a strategic business investment, providing a means of expansion that minimises risk and cost. More than this, finance secured against a portfolio of cases can also help law firms remain competitive and flexible – and critically to differentiate themselves in an increasingly discount-driven industry.
Specialised law firm financing solutions are a more strategic and usually a more appropriate investment option than traditional bank loans or partner funding. With banks’ lack of understanding of the business of law generally and litigation risk specifically, appropriate finance can be difficult to obtain.
Woodsford’s range of law firm finance options provide a highly structured, partnership approach to funding that can drive higher returns and significantly reduce risk for law firms around the world.
We can offer lending facilities to firms which may be linked to the firm’s contingent or conditional returns on a given case, or portfolio of cases. We can accelerate receipt of fees, providing capital that firms can immediately recognise as revenue and utilise for any purpose.
Law Firm Portfolio Finance
Our Law Firm Portfolio Finance solutions work in a similar way to our portfolio funding arrangements, whereby we invest in firms with whom we have completed extensive due diligence or worked with previously. Our investment and our return are spread across a portfolio of claims, giving firms accelerated financing, delivering faster service to clients and avoiding any burden of debt. And because our finance is secured across a portfolio of claims, the levels of risk and therefore the cost of capital are reduced.
Through this approach, we can provide financing for firms where our return is conditional on their success in a wide range of litigation or arbitration cases. Our financing can be used for any purpose, including recruitment and expansion plans.
Portfolio funding from Woodsford has a number of advantages over bank loans and partner equity. Our financing is non-recourse, meaning we get a return only in the event of a success in the cases within the portfolio.
Law Firm Lending
Though Woodsford’s solutions are generally non-recourse, with Woodsford’s return conditional on success in the underlying litigation or arbitration cases, we will also consider traditional lending solutions. Such a loan facility is normally secured against agreed assets, with commercial interest rates, applied. Such lending facilities may be granted for emergency support or as working capital.
We also offer a unique Convertible Litigation Loan, which will be attractive to claimants that may be asset rich but cash poor. Our Convertible Litigation Loan starts life as a normal loan secured on standard assets as well as any proceeds of the claim being funded, but can be converted into non-recourse funding upon certain pre-agreed trigger events.
Litigation Funding as Corporate Finance
Litigation is expensive, unpredictable and risky. While for many claimants it may be the only way to unlock a disputed asset or claim, the risks involved often mean businesses do not proceed with an action – even those that do have the necessary resources.
Litigation can also present a major accounting challenge for finance directors. Rules often require litigation costs to be expensed, reducing operating profits. Even if a claim is resolved successfully, the associated income is treated as a one-off item rather than operating income.
These factors combine to make litigation an unattractive option for many businesses, causing them to lose out on the potential value of the litigation asset.
Woodsford can help in both scenarios by delivering litigation funding as a Corporate Finance solution, through Risk Hedging or Positive Accounting. With these solutions, we take on the costs and risks burden of a litigation or arbitration, often in liaison with highly skilled claimant law firms. This approach gives the claimant huge potential advantages with minimal risk.
We can also help litigants manage the adverse accounting consequences of litigation. We pay the costs, avoiding drag on the profitability of the business. Our funding may allow the business to divert cash to other projects, assisting asset value. A successful litigation can then be viewed as both a positive cash and income event.
For more information contact: Mitesh Modha