Plaintiffs’ lawyers face many challenges running their practice because of the unpredictability of their cash flow. As a result, they often seek out alternative funding in order to have money to pay bills while waiting to receive settlements.
There are many funding companies eager to make money off of lawyers, so how can you find the right one? Here are 8 essential questions you should ask any funding company you are considering:
- How long has the funder been in business and do they have a significant transactional history? It’s important to deal with a company with a long track record working with other attorneys like you and evaluating cases similar to your own. Ask other attorneys about the company’s reputation in the industry. Research them online to learn about any potential problems.
- What type of experience do they have with lawyers? You should find out more about the owners and employees of the business. Ask whether they are lawyers themselves and if they have had experience running a law practice. Working with a funding company that is owned and operated by lawyers has several benefits. These individuals appreciate what it means to litigate contingent fee cases and run a practice that can’t wait for a settlement to come in to pay its bills. They also understand how to evaluate your pending settlements so they can process your application quickly and efficiently without bothering you to get additional information.
- What kinds of cases do they fund? You want to make sure the company has experience handling the types of cases you have most frequently. For example, not all companies will provide funding for settlements that are still awaiting approval such as class actions.
- How quickly can they fund? A funding company should be able to provide fast funding, including same day cash in certain circumstances. If they can’t, then it’s probably because they don’t have the knowledge or staff to evaluate cases immediately or they don’t have the money on hand to pay you.
- Where do they get the money they provide to attorneys? It’s important to know whether the company has its own funds or if they need to obtain cash in order to pay you. Some companies are really “brokers” who go out and look for the money after they sign with you, which means delays in getting you cash. A company who has its own funds can provide money immediately.
- Are there extra costs? Some companies charge application or due diligence fees or have other “hidden” costs. A reputable company shouldn’t charge extra fees.
- Does the funder keep the transaction confidential? There are many companies who notify the defendant that the fee has been assigned – and this is deadly to a plaintiff’s attorney. Funders should never do that. They should keep all transactions confidential unless the contract is breached.
- Does the company provide funding across the country? Some companies only offer funding in one state, which may be an issue for some law firms.
If you are considering using a funding company, do your due diligence. Ideally, vet companies before you need them so you don’t feel pressured to make an immediate decision and end up dealing with the wrong funder.