Firm Expansion and Growth Using Portfolio Funding
Law firms exploring strategic growth have a new financing option to consider. By securing funding against a portfolio of three or more commercial litigation cases on a partial contingency basis, firms gain access to capital provided by Bentham. That capital can be used for any purpose, including hiring lawyers and opening new offices.
While law firms have traditionally taken bank loans or used their own partner equity to cover expansion costs, litigation finance presents an appealing new option for a number of reasons. First, unlike bank loans, the capital deployed by funders like Bentham is not treated as debt. Instead, it is a non-recourse investment. If the cases in the funded portfolio do not result in fee revenue, the firm owes the funder nothing – not even the original investment. So the firm’s capital reserves will never be depleted to repay a funder.
Second, Bentham offers an additional safety net with portfolio funding by capping the returns from portfolio investments. Capped returns provide predictability for the law firms and often result in net fees that can be twice Bentham’s return. Bentham has designed its portfolio funding product to enable firms to do better than Bentham, because when a firm accepts portfolio funding, our investment risk is lower. The risk is spread across many cases, rather than just one, so we face less risk of losing our principal.
The third advantage of portfolio funding is that the firm minimizes its risk when taking a commercial matter on a contingency basis. We typically cover a portion of the fees while firm charges a full contingency fee. Firms can therefore start offering contingency arrangements or increase the number of cases they take on this basis.
This win-win design has helped our colleagues in the US forge nearly a dozen partnerships with firms that appreciate the advantages of portfolio funding. To be eligible for funding, a portfolio should include three or more commercial cases where the defendants have the ability to pay the judgments.
Portfolio funding is not right for every firm, but it is a powerful option to fuel expansion and growth for firms with litigation practices and an appetite for taking measured risk.
To learn how portfolio funding can make a difference for your law firm, contact us