Money when you need it most – immediately prior to the money leaving your bank account in fees.
Covering Initial Disbursements
These early expenses are paid in advance of the firm’s recovery of the fees, and therefore will require the firm to draw down funds from its finance facility to cover these disbursements prior to the client’s payment on account becoming available.
Instructing Counsel Early
There are circumstances where a matter will require a barrister from the outset (e.g. a without-notice application for an injunction or an urgent hearing). Paying counsel’s brief fee up front can be facilitated by the firm having an available credit line against the new instruction rather than the firm’s working capital being eroded whilst the firm waits for internal cash reserves to be released. See also Law Firm Finance.
Managing AML and Onboarding Costs
As noted above, client due diligence can cost a number of pounds in terms of identity verification tools, company searches and staff time. This will all be incurred prior to any chargeable work being conducted and therefore can be covered by a firm’s finance facility as part of the drawdown to cover onboarding expenses of new clients.
Using Staged Drawdowns
The funds are made available to the law firm by means of a drawdown facility, i.e. a facility that enables the law firm to drawdown funds on an as needed basis. Initially a certain sum is drawn down on the instruction of a new matter and thereafter further sums are drawn down from time to time prior to the matter being brought to trial, e.g. on the completion of pleadings.
Used carefully, finance at the instruction stage can allow a firm to accept good work, without locking up all their cash.
