Starting a business is hard. Starting a contingency fee law firm is harder. For many entrepreneurs, working for yourself is exciting until you realize that owning your own business also involves owning everything that entails. It can be overwhelming managing the firm’s business needs while also litigating.
Overcoming the Challenges of Self-financing for Growing Firms
At the start, many lawyers fund their practice with personal savings or investments from family and friends. As your firm celebrates its first wins, you may reinvest earnings back into the business to pay for case costs, hire talent or run marketing campaigns to acquire more cases. However, as your practice grows, your reinvestments will begin to spiral as you take on more cases and invest even more into cases with high earnings potential. Soon, you will notice there is little cash leftover for critical business initiatives. Your firm will essentially be living paycheck to paycheck, waiting for the next case payout for funding.
This painful balancing act is one contingency fee law firm owners unfortunately know very well. It hampers the firm’s growth potential, never having enough to invest in initiatives that could accelerate growth such as case management technology, digital advertising campaigns or hiring high quality attorneys – these all require capital and liquidity, but yours are tied up in case costs.
Identifying a Strategic Banking Partner
At this point, most law firm owners go to their bank for a business loan. But, most bankers do not understand the business model of a contingency fee law firm and struggle to accurately value a law firm’s greatest asset — their contingent case inventory. Consequently, many firm owners will either be rejected or receive a loan for far less than their business needs.
Founded by trial lawyers, Esquire Bank uniquely understands this pain. Esquire Bank has the expertise to value a firm’s case inventory and the authority to lend against it.
The advantages of obtaining financing with an attorney-staffed bank are manifold, but the most important are:
- First, the bank has the expertise to accurately value your case inventory and can offer loans that enable you to make the necessary investments for exponential growth.
- Second, the bank has products tailored to contingency fee law firms: a Case Cost Line of Credit to free up the cash tied up in cases and a Working Capital Line of Credit to invest in growing business operations.
- Third, while many commercial banks have onerous fees and covenants, Esquire Bank does not. Additionally, Esquire Bank does not require the firm’s partners to put up personal assets as collateral.
- Lastly, unlike non-bank lenders and litigation funding companies, we are FDIC insured and offer expanded access to capital (due to our unique ability to value a law firm’s case inventory as collateral) and can offer lending facilities at highly competitive bank rates.
Juggling the roles of law firm owner and litigator are stressful enough. Funding the vision for your law firm’s growth should not be.
Interested in learning more about law firm growth strategies? Visit LawyerIQ
Learn more about how specialized banks, such as Esquire Bank, can help you retain ownership, fund growth and achieve your vision by visiting lawyeriq.esquirebank.com.
The information provided in this blog is provided for general informational purposes only. Some of the information may not be applicable or appropriate for all law firms.
