Expert witnesses, depositions, and medical records cost money years before a settlement arrives. Learn how firms fund litigation without partner capital calls.
The Cash Flow Reality of Contingency Practice
Plaintiff firms invest heavily and get paid unpredictably. A single complex case can consume $75,000 to $500,000 in expert witness fees, medical record retrieval, deposition transcripts, accident reconstruction, focus groups, and trial technology, all disbursed over two to four years before any recovery. Meanwhile associate salaries, rent, and marketing continue every month.
The result is a portfolio of highly valuable but completely illiquid assets. A firm might carry $4 million in advanced case costs across 200 active matters and still struggle to fund a partner draw in a quarter where no cases resolve. Settlement timing is genuinely random from the firm’s perspective.
Historically the answer was partner capital calls or personal lines of credit, both of which put individual attorneys’ balance sheets at risk. A properly structured firm-level credit facility solves the problem far more efficiently.
How Law Firm Lines of Credit Are Underwritten
Lenders underwrite plaintiff firms on historical realized fee collections rather than on the speculative value of pending cases. Expect them to review three to five years of fee revenue, showing both the total and the distribution, because a firm that collected $6 million from four cases is a different credit than one that collected the same amount from 300.
They will also examine your advanced case cost balance, average case cycle time, practice area mix, and case acquisition costs. Firms concentrated in mass torts or single-event catastrophic litigation carry more timing risk than diversified personal injury practices with a steady stream of soft tissue and auto cases resolving monthly.
Collateral is typically a blanket lien on firm assets including case proceeds, along with personal guarantees from the equity partners. Facilities usually revolve, with interest-only payments on the drawn balance and an annual renewal review.
Line of Credit Versus Non-Recourse Litigation Funding
Case-specific non-recourse litigation funding advances money against a single matter and is repaid only if the case succeeds, but it prices that risk aggressively, often taking a substantial multiple of the advance or a percentage of recovery. It is appropriate for a genuinely outsized case that would otherwise be unfundable.
A firm-level line of credit is recourse debt priced at conventional commercial rates, typically floating over a published index. For a firm with a diversified docket and consistent historical collections, it is dramatically cheaper capital and preserves the full value of every settlement for the firm and its clients.
Most established plaintiff firms should exhaust conventional credit capacity before considering case-specific funding. Angel Funding Group structures revolving lines and term debt for law firms precisely so that partners are not forced into expensive alternatives to keep litigating.
Managing the Facility Responsibly
Discipline around case selection matters more once you have access to credit. A line of credit makes it easy to take marginal cases that would have been declined when capital was scarce, and a portfolio diluted with weak matters is exactly how firms get into trouble with leverage.
Track advanced costs by case and by attorney, and review aging quarterly. Cases that have consumed more than a defined threshold without a settlement demand deserve a hard look, and knowing your average cost per resolved case by practice area lets you price your docket rationally.
Ethical rules require that case costs advanced on behalf of clients be handled correctly, and your engagement agreements should clearly address cost recovery from settlement proceeds. Coordinate with your firm’s ethics counsel before pledging case proceeds as collateral, since the treatment varies by jurisdiction.
Beyond Case Costs
A well-sized facility does more than fund litigation expenses. It smooths partner draws across lumpy quarters, funds the marketing spend that generates case intake, and allows the firm to hire associates ahead of caseload rather than after it becomes a crisis.
It also positions the firm for larger strategic moves, including buying out a retiring partner or purchasing the office building the firm currently rents. Both are common next steps once a firm has demonstrated it can manage a credit facility responsibly.
The firms that scale successfully treat capital as a managed resource with a plan, not as an emergency measure. Setting up the line during a strong collection year, when the financials look their best, always produces better terms than seeking it during a dry quarter.
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