Solicitors Funding and Legal Finance
There are many types of funding for solicitors and legal professionals available and sourcing such finance has become easier due to the increased number of lenders who specialise in legal finance.
Legal professionals are becoming more aware of the positives of using specialist finance facilities to assist in the operation of their business.
Many are using funding to;
- Assist with cash flow by releasing money tied up in disbursements
- Increase volumes of cases by assisting with acquisition costs and all associated disbursements
- Manage exposure to lenders, which in turn enables them to access additional business funding when required
Here at RLA Capital we benefit from having access to the largest number of lenders who specialise in the legal industry and with 25 years of experience in dealing with solicitors funding requirements we can source the best types of solicitors funding for legal professionals.
General forms of business funding, those that are not specialised types of legal funding are used to increase spending power and a company's ability to invest, grow and improve cashflow. There has been a positive trend in the alternative finance sector within the UK, with business funding application approvals increasing year on year since 2015. P2P finance providers approvals exceeded £3 billion in 2018. [source: https://www.p2pfa.org.uk/uk-peer-to-peer-lending-data-reflects-continued-maturity-of-the-sector-during-2018/]
Acquisition funding is used within the legal industry to purchase another practice allowing the company to expand, take on new capabilities and increase potential growth.
Many legal professionals use additional funding streams to assist with a purchase as it allows them to preserve current company cash reserves. Due to the speed of acquiring finance many organisations are taking advantage of these types of finance facilities to promote growth and increase competitiveness.
Invoice finance is used to increase cashflow within an organisation. As all businesses need to maintain adequate cash flow to maintain its financial health, to ensure operations flow smoothly. Waiting on unpaid invoices can affect a company's ability to cover its costs.
Invoice finance facilities differ depending on several factors such as amounts required, financial status, terms and payment structures. What is common however is how increasingly access they have become for a wide range of businesses. [find out more]
VAT and Tax Funding
VAT and Tax finance facilities are extremely popular within the legal industry, as there are many benefits associated with the use of VAT and tax funding solutions.
In short, using fixed monthly repayment finance facilities allows law firms to avoid costly late payment penalties on their VAT and Tax bills with HMRC imposing 15% and 10% late payment penalties respectively.
Working Capital and Cashflow Funding
Working Capital and Cash flow loans can be used to increase a firm's cashflow and readily available funds. If a solicitor's firm is experiencing a lack of working capital and cashflow, this will have a negative effect on the ability to operate efficiently.
In response to this, there are a wide range of lenders, such as those on RLA Capital's lending panel, who seek to provide loans and funding to legal professionals.
As with all businesses, solicitors and legal professionals require money in order to operate efficiently and cover operating costs such as rent, professional subscriptions, wages and utilities. Such expenses fall under working capital and cashflow.
Specialist Solicitors Funding
Depending the type of clients and cases a solicitor works with, many firms require additional and more specialist legal finance facilities. These facilities include;
- Case Acquisition Finance
- Cost Advance & WIP Funding
- Disbursement Finance
Case Acquisition Finance
Case Acquisition Finance is another important type of solicitors funding which is used to acquire cases or fees to expand a law firms client base with the aim to maximise turnover and promote business growth.
Many firms seek additional funding to assist with case purchases, due to the speed of acquiring the finance as opposed to using any existing cashflow within the business.
Cost Advance & Solicitors WIP Funding
If a legal practice is due payments or fees from outstanding cases and fees, the use of cost advance or WIP funding can be an ideal solution. Being able to gain additional funding based on the predicated income from outstanding cases or WIP operations increases readily available funds for day to day operations. The use of solicitors WIP funding and cost advance funding have become increasingly popular within the legal profession. This is due to the ease of applications and the speed of payments.
Disbursement finance is a highly sought after form of solicitors funding as it enables legal proceeding to commence and/or continue without delays caused by lack of available money.
This type of solicitor's finance is used primarily to fund disbursements on behalf of their clients, for goods or services received or the outcome of legal proceedings.
Disbursement funding is relatively straight forward to acquire, an up to date disbursement ledger, your last 3 months bank statements and last filed accounts are all that is needed to get your application started.
When seeking funding, finding the most suitable source can be difficult and time consuming.
Based on the best approach can be to use a specialist finance broker. There are several advantages to using a finance broker, with some being more obvious than others.
The Long Story Short
- Finance brokers carry out all the leg work, saving you time
- They have links with lenders and know of their requirements due to the volume of facilities transacted with lenders - i.e. the broker will do x amount of facilities per month with lender y
- They have the skill and experience to select lenders that are most likely to accept an application
- A broker can identify the best deal for you
- They can advise you on the best types of facilities - both present and future requirements
- You and the broker can build a good working relationship and rapport allowing for easier future applications to take place.
- They can save you time and money
For more information on how brokers can help have a read of this article [What are the advantages of using a finance broker]