For law firms—particularly those operating on a contingency-fee basis—case expenses are viewed as a cost of doing business. They are necessary to pursue justice for their clients, yet often detrimental to the firm’s cash flow. Law firms can and should treat their case expenses as strategic investments.
Thanks to innovative attorney financial management tools, including the case expense financing service offered by Advocate Capital, law firms can reframe their case expense strategy and better position themselves for long-term growth.
Contingent-fee law firms that fund their own cases are essentially making interest-free loans to their clients. Law firms that use case cost funding are able to get their post-tax profits out of their cases and spend them how they want to spend them.
Opportunity Costs of Self-funding
Often, law firms front their case costs themselves, hoping it will eventually be repaid when the case is won, hopefully with a return. But this approach comes with several risks:
1. Cash Flow Limitations: Tying up firm capital in case expenses reduces financial flexibility.
2. Growth Bottlenecks: Firms may hesitate to take on additional or larger cases because of the worry that they will not be able to cover case expenses or their firm’s operational costs.
3. Reduced Client Capacity: Limited capital can mean turning away deserving clients.
These are significant opportunity costs. When firms self-fund everything, they often forgo investments in operations, technology, or marketing initiatives that could otherwise fuel firm-wide growth.
Benefits of Financing Case Expenses
Using a case expense financing partner like Advocate Capital transforms how firms operate. Benefits include:
- Preserved Cash Flow: Advocate Capital clients can be reimbursed for their case expenses. As a result, they are able to keep capital free for operations, payroll, marketing, and growth initiatives.
- Scalability: Take on more high-value cases without cash flow restraints.
- Even Better Results: Litigation funding alleviates financial pressure so attorneys can concentrate on achieving the best case outcomes for their clients. Law firms that utilize case cost funding can hire and retain the best experts for their cases without worrying about how it will impact their firm’s cash flow.
How Advocate Capital Supports Strategic Case Investment
Advocate Capital’s case expense financing solution is built specifically for contingency-fee law firms. Here’s how it works:
- Per-Case Borrowing: Once a firm’s application is approved by our credit committee, they are able to submit funding requests through AdvoTrac®, our proprietary software platform, to be reimbursed for their case expenses. The firm pays us monthly for the interest on their line balance. When a case concludes, the firm will use the proceeds from the case to pay the principal borrowed for case expenses.
- Ethical Pass-Through Option: Our proprietary software, AdvoTrac, allows our law firm clients to track their case expense line of credit on a case-by-case basis. The case-by-case tracking of borrowing costs makes it possible for Advocate Capital, Inc. clients to reduce their net cost of capital to below 1%* (on average) by recouping their borrowing costs from their cases.
This model empowers firms to make smart financial decisions while keeping the focus on client advocacy and long-term success.
Rethink and Reframe
With support from a partner like Advocate Capital, your firm can increase profitability, grow your firm, and serve more clients effectively.
Ready to make smarter financial decisions for your firm? Contact us to learn more about how Advocate Capital helps law firms turn case expenses into strategic growth opportunities.
