Prior to The Lawyer‘s annual Managing Partners Dinner, the magazine interviewed some of those attending, asking them what they believed were the biggest challenges facing law firms in 2018. One theme that came through was the unprecedented competition Law Firms faced from alternative legal services and the need to access capital to compete effectively.

Having the investment capacity to compete in a “diverse legal marketplace”, as stated by one interviewee, is crucial; “the traditional law firm partnership structure doesn’t lend itself to long-term investment decisions at the scale needed to attract the right talent, grasp the opportunities of technological advances like AI and compete effectively with new market entrants”.

Having the capacity to take on large and complex litigation matters can add to a firm’s revenue, and boost its reputation with clients and employees. The battle for talent is relentless in the legal sector, with firms competing not only with each other, but companies offering in-house opportunities which often come with a more attractive work-life balance. Having a reputation for offering truly fulfilling and stimulating work is one way to attract Solicitors at the top of their game who are looking to stretch themselves professionally.

Disbursement Funding provides a route for Law Firms to obtain capital in a low-risk manner. However, not all practices fully understand what Disbursement Funding is and its advantages.

What is Disbursement Funding?

Disbursement Funding is the provision of finance for costs associated with litigation. These can include (but are not limited to):

  • court fees
  • medical reports
  • radiology reports
  • forensic accounting
  • expert opinions/witness fees
  • barristers’ fees

Disbursement Funding provides a vehicle for SME firms and those specialising in personal injury, family law, and commercial litigation to access the capital required to take on larger cases without crippling their cash flow.

What are the advantages of Disbursement Funding?

The power of Disbursement Funding lies in delay. It allows a Law Firm to borrow the money it requires to fund the third-party costs that form part of a litigation on terms that are agreed with the funder.  This provides time to settle even the most complex cases. And by ensuring existing firm capital is not tied up in paying disbursement fees in advance of settlement, management teams can redeploy funds to projects and investments which promote business growth.

Is there a difference between Disbursement Funding and Litigation Funding?

One of the key reasons Disbursement Funding is underutilised is that it is often confused with Litigation Funding, when in fact, they are two distinct products. Litigation Funding involves a third-party providing money to a litigant (or the Law Firm representing them) whether that be an individual or business, to fund their case. Funding for disbursements is a component of litigation funding. Funders assume the risk of litigation, allowing litigants to pursue a case they may otherwise have not had the cash flow to finance. Disbursement Funding, on the other hand, is finance directly provided to Law Firms, delivering an immediate injection of capital required to take on what could be a highly lucrative matter, allowing the practice to divert its cash flow to other revenue generating streams.

How does Disbursement Funding benefit clients?

Most clients are completely unfamiliar with the litigation process and therefore nervous, not only about the financial risk, but also the reputational harm incurred if things go wrong. Disbursement Funding allows a Solicitor to reassure their client that funds are available to ensure top experts are instructed to provide reports and/or opinions when needed. This is vital, particularly in medical negligence or complex personal injury matters, where successfully winning a claim can have a lasting impact on a victim’s prospects of recovery and quality of life.

In addition, being able to instruct the top experts in their field enhances a Law Firms reputation in the eyes of clients and also within their specialist legal sector, opening doors for further opportunities.

In summary

Disbursement Funding provides a robust vehicle for Law Firm growth and reputational development. By taking tactical advantage of this and other funding options, practices can expand both their casebooks and reputation for successfully handling complex, lucrative legal matters.

To find out more about Disbursement Funding or Litigation Funding, please contact us on 0333 222 5731 or talk to your solicitor.

BMS Funding works with the legal profession and businesses to provide funding solutions for all market sectors.

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