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How Financing Legal Fees is Done

Yes it is true that a big number of the small and medium sized law firms are looking forward for prosperity, just few of them have the funds to deal with the increased case load or extended settlement payments. As a matter of fact, factoring is the purchase and the sale of accounts receivable to which in this case is legal fees is offered at discounted price or close to the time of creation which can help to solve common cash flow challenges.

What happens here most of the time especially with specialty finance firms is buy the legal fees on settled cases. By the time when the case is finally settled and at the same time, when the documents have been cleared by the plaintiff and defendant, the receivable fee will be available for a discounted price which is roughly 2 to 12 percent and that also depends on the payor and the amount. The major difference in the rates is basically on the estimated time it is required to recollect the fee.

Here are few of the steps on how the entire process is done.

Number 1. Master fee purchase agreement – for this one, it’s actually done to be able to specify terms under which fees are bought and normally includes the fees, advance rates, rebates and minimum and maximum amounts.

Number 2. Submitting fee purchase – here is where the submission of the fee for purchase by using the submission forms/process factor is done. The documentation is fairly simple and the closing is typically done within 24 to 48 hours. Believe it or not, the documentation only needs the copy of judgment or settlement, copy of client fee agreement, must be signed by the insurance firm, the defendant or other payor nad last, must have a letter of instruction from attorney to payor which will direct payments to the lockbox or the bank of factor.

Number 3. Acceptance – basically, it solely depends on the factor whether to accept the purchase of fees or not. The discount will be included too in the factor’s fee and to any margin or haircut form of the face value where the factor is necessary. Normally, factoring of the legal fees needs no haircut if ever the payor has no unquestioned credit record.

The letter and the assignment of instruction from you is sent to the payor of fee which is usually the insurance company.

Number 4. Payment – the payor must send all checks to the factor where the amount will be credited to your account as received. If ever the payor paid in timely manner meaning less than 3 months, you’ll get a rebate when enough money is collected in closing a particular transaction.

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