For plaintiffs’ law firms, a successful settlement does not always translate into immediate cash flow.
A case may be resolved and attorney fees earned, but weeks or months can pass before settlement proceeds are received and fees are distributed.
For a law firm with ongoing payroll, case expenses, marketing commitments and growth plans, that gap can matter. Post-settlement funding can give firms another way to manage the period between earning a fee and actually receiving it.
What Is Post-Settlement Funding for Law Firms?
Post-settlement funding allows a law firm to access capital based on attorney fees from cases that have already settled but have not yet been paid.
Unlike financing tied to the potential outcome of an unresolved case, post-settlement funding involves a case in which a settlement has already been reached. The remaining uncertainty generally relates to the timing and process of receiving and distributing the settlement proceeds.
For firms that operate on contingency fees, this can help address one of the fundamental challenges of the business model: expenses occur continuously, while revenue can arrive irregularly.
When Can Post-Settlement Funding Make Sense?
Here are several situations in which post-settlement funding may be worth evaluating.
1. When a Firm Is Waiting on a Significant Attorney Fee
A large case may be settled, but the firm’s fee can still be weeks away from distribution.
That creates an unusual situation: the firm has generated the revenue, but cannot yet put the money to work.
If the delay is affecting ordinary operations or preventing the firm from pursuing an opportunity, post-settlement funding may provide a way to bridge that timing gap.
2. When the Firm Has an Opportunity to Grow
Sometimes the reason to access capital isn’t a financial challenge, but an opportunity.
Perhaps the firm has identified an experienced attorney it wants to hire. A successful marketing campaign is ready to scale. New technology could improve intake or case management. Or the firm has an opportunity to expand into another practice area or market.
Waiting several additional weeks for attorney fees may mean delaying or losing the opportunity.
3. When Several Settlements Are Awaiting Payment at Once
Contingency-fee revenue can be inherently uneven.
A firm might settle several substantial cases within a short period and still experience a temporary mismatch between revenue on paper and cash available to operate the business.
Post-settlement funding can potentially smooth some of that irregularity by giving the firm access to capital associated with qualifying settled cases rather than requiring it to wait for each settlement to complete the payment process.
4. When the Firm Is Investing in Case Acquisition
Growth often requires spending money before the resulting revenue arrives.
Marketing, advertising, intake personnel and referral relationships can all require ongoing investment. For a contingency-fee practice, the return on that investment may not be realized until cases resolve months or years later.
If a firm has already earned substantial fees from settled cases, post-settlement funding can potentially help convert those pending fees into capital that can be reinvested into future growth.
Post-Settlement Funding Doesn’t Have to Be a Last Resort
One of the biggest misconceptions about law firm financing is that a firm should consider it only when it is short on cash.
That overlooks how businesses in many industries think about capital.
Access to financing can be used to manage timing, preserve liquidity, pursue opportunities and determine when to deploy resources. For a law firm, the same principle can apply.
That makes post-settlement funding potentially relevant to healthy, growing firms as well as firms addressing short-term cash-flow needs.
Greater Control Over What Comes Next
A settlement may mark the end of a case, but for the law firm, business continues.
People need to be paid. New cases need to be developed. Technology needs to be maintained. Opportunities to hire, market and grow may arise regardless of when settlement proceeds arrive.
For firms with qualifying attorney fees awaiting distribution, post-settlement funding can provide greater flexibility over when capital becomes available and what the firm chooses to do with it.
At RapidFunds, we help law firms understand their post-settlement funding options and determine whether funding makes sense for their particular circumstances.
The case may be settled. Your firm’s next move doesn’t have to wait.
More more information on post-settlement funding, visit us at RapidFunds.com.