Avoid These Problems With Your Legal Funding Documentation
When your law firm needs legal funding quickly, the last thing you want is to have problems with your funding application. Funding companies will typically require a range of information about the firm, its finances and the settled case being funded. In many cases, this documentation is easily gathered and there is no delay in processing the application. However, there are some common problems that should be avoided in order to ensure a fast turnaround and quick access to cash.
- Signed retainer agreements. This should be obvious, but a law firm needs to provide proof it is entitled to a legal fee in the settled case.
- Signed agreement showing fee sharing. If the settled case involves co-counsel and a fee share or fee split, the funding company will need a signed document showing the agreed upon fee division. However, in some cases where no signed agreement exists, correspondence/emails confirming the arrangement may also be sufficient.
- Signed agreement showing referral fee. If there is a referring attorney, a signed document disclosing the referral fee and the firm’s fee is necessary. However, there are exceptions. Where there isn’t a signed agreement, such as in cases where the attorneys work together often, an experienced and reputable funding company may look at the circumstances and decide on a case by case basis whether to grant funding without a signed referral fee agreement.
- Signed settlement agreements. Again this is obvious; but note that where settlements are done at mediation, the signed mediation memo is required.
- Insurance company documentation. Where the settled case is with an insurance company, funding companies require additional information including: documentation that proves the settlement amount; the signed settlement agreement or general release by the client; and the signed retainer agreement showing that the lawyer was retained.
- UCC lien terminations. Some law firms have old UCC liens filed which are no longer active. A funding company needs copies of the termination statements showing that the liens are terminated.
- Tax lien clearance. If there are tax liens against the law firm, documentation is required showing that the tax lien has been cleared.
- Bank lien subordination. Where a bank has a lien against the firm for a small line of credit, the funding company will need the bank to provide a subordination agreement on the settled case that is being funded giving the funding company priority.
If you are considering legal funding for your firm, contact us to discuss your situation.
To learn more about funding documentation, check out our blog post on What Information to Prepare Before Going to a Legal Funding Company