Litigation funders are most commonly known for single case funding, providing access to justice through individual acts of financing litigation and seeking returns on those individual investments. However, funders are making active efforts to pursue broader financing of law firms, both supporting the launch of start-ups and offering flexible financing options to established law firms to either fund further litigation or support capital expenditures for growth.
An LFJ Conversation with Michael Kelley, Partner, Parker Poe
Litigation funders are most commonly known for single case funding, providing access to justice through individual acts of financing litigation and seeking returns on those individual investments. However, funders are making active efforts to pursue broader financing of law firms, both supporting the launch of start-ups and offering flexible financing options to established law firms to either fund further litigation or support capital expenditures for growth.
A new article by The Lawyer features insights from a number of leading funders who offer their perspectives on what opportunities exist for law firm financing, what their own priorities are and where the future of these endeavours might lead.
Maurice MacSweeney, director of legal finance at Harbour, summarised his firm’s approach as positioning itself as ‘funders for the business of law, and not just litigation’. Harbour’s chief investment officer, Ellora MacPherson, reinforced the fact that whilst funders’ capital will not be as cheap as traditional lending from banks, Harbour can help law firms access capital with a more flexible approach.
Adrian Chopin, managing director of Bench Walk Advisors, suggested that recent examples of funders providing this type of financing to law firms demonstrates that industry leaders ‘are beginning to think about more interesting ways to structure their businesses than the traditional partnership-funded model’. Therium Capital’s Neil Purslow also highlighted the potential tax benefits from moving away from the partnership model, stating that ‘it may be more attractive for a firm to use financing, which then reduces taxable profits.’
Looking at it from a third-party perspective, Mike Estill from Kindleworth, a provider of managed services to the legal sector, argues that this kind of funding fills an important gap in the market left by banks who ‘can’t get comfortable with the risk profile’ of funding the launch of new law firms. Burford Capital’s managing director, Mike Redman, emphasises that litigation funders can provide capital that solves ‘an obvious cash gap that needs to be filled if a firm wants to try and grow not just from cashflow.’
