Themis has recently written about how the Corona Virus Pandemic might affect the future of litigation funding. Today we will turn our focus on a more immediate issue and point out how law firms with a portfolio of good cases on contingent fee arrangements can use Claim Based Funding to manage cash flow, finance growth and reduce risk during this precarious time.
Law firms which handle a substantial amount of their case load on a contingent fee basis enjoy the potential for out-sized profitability when those cases are resolved successfully. However, the timing and amount of the cash flow generated by such cases is very difficult to predict. That fact has been exacerbated by a slow down in the courts which delay trials and settlements and a slow down on the payment of hourly fees which these firms often use to offset the uncertain timing of contingent fee payments.
Naturally the contingent fee firms have recurring expenses for associates and overhead and in many cases the obligation to fund out-of-pocket costs for their cases. With slowing cash flow and persistent expenses, these firms must maintain a significant level of working capital to continue to finance their operation. Claim Based Funding can help these law firms finance their working capital requirement and, thereby, offer the firms a way to make their cash flow more predictable during this challenging time.
A Claim Based Funder like Themis can evaluate the merits of a firm’s portfolio of cases and anticipate the amount of fees that are likely to be generated by the portfolio. With awareness of the strength of the cases in the portfolio and the likely recoveries, Themis can structure a transaction that would allow the firm to draw down funds against the portfolio as cash flow is needed. The firm would repay the funder when the cases are resolved and the contingent fees collected. The net result for the firm is cash flow to navigate the current dislocation, reduced risk of loss, reduced volatility and a reduced need to hold excess working capital.
If your firm would be interested in building a relationship with Themis, please contact us.