Like many plaintiff attorneys, you may be thinking about getting involved with some of the current mass tort actions (or expanding your existing involvement in them) but have been challenged by the large amount of capital that mass torts can require.
Generally, there are many capitalization options available to contingent-fee law firms, which you can learn about in more detail in my book How David Beats Goliath – Access to Capital for Contingent-Fee Law Firms. When it comes to funding mass torts, however, some of the less expensive forms of capital are more difficult to obtain. Banks, for example, are often wary of lending for mass tort programs because they see that as risky “venture capital” for law firms.
In fact, many of the sources of capital used for mass tort actions are on the most-expensive end of the cost spectrum. Fee sharing, for example, is a common way for smaller firms to participate in mass torts, but the effective annual rates for fee sharing can be extremely high. (See chapter six of my book or watch this short video for more details on the true financial costs of fee sharing). Some non-bank lenders claim to fund mass torts, but they typically charge rates in excess of 20% per year. While you may think that your mass tort game plan can justify rates that high, there is another much less expensive form of funding which may be available to your firm.
Does your practice include contingent-fee cases that are not mass tort related? Do you have significant funds tied up in case expenses in those cases? If you answered “yes” to these two questions, you may be able to extract your cash from those cases at very low cost (as low as 1% per year) and then use that cash to fund your mass tort growth. If your mass tort business model is profitable with a 20% interest rate loan, how much more profitable would it be if your cost of funds was 1%?
At Advocate Capital, Inc., we provide lines of credit for law firms (that qualify) and then use our proprietary AdvoTrac® software to track those lines of credit on a case-by-case basis. The result is a net cost of funds for our clients that is typically under 1% per year! Many of them use the proceeds from those lines of credit to increase their mass tort presence (and profits.) To learn more, watch the short video on our home page here www.AdvocateCapital.com or call 1-877-894-9724 today for a free case expense funding consultation.
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