Law Practice Financing
The legal industry is an incredibly historical sector. Throughout history, societies across the world have developed a variety of established systems and laws to govern people and to limit chaos in cities, but with the creation of laws came people who needed to be knowledgeable in the depth of the laws to enforce them, as well as to help mitigate interesting circumstances. This looked very different in the beginning of time, and today lawyers have to undergo extensive training and schooling to become knowledgeable enough to practice law; this has led to an incredibly large and profitable industry in the United States today.
Many times people associate the term lawyer with negative connotations, but most lawyers go into the legal industry to make the world a better place while helping others. Lawyers want to protect the rights of people for those who cannot do it themselves. This has led to lawyers becoming one of the highest ranking jobs throughout the country, with many more law graduates than the industry can provide jobs for, making the lawyer and law practice industry incredibly diverse, competitive, and profitable. The median pay for lawyers in 2015 was $115,820 per year with a 6 percent projected employment growth through 2024; today, there are over 1 million lawyers in the United States alone. Even though there is plenty of competition in the legal industry, there are a variety of specialties that law practices can focus on. The most common include: administrative and regulatory, admiralty and maritime, alternative dispute resolution, appellate litigation, bankruptcy and restructuring, civil law, class action, constitutional, contracts, criminal, data security, document review, education and non-profit, environmental, family, general corporate, family, international, malpractice, labor and employment, mergers and acquisitions, real estate, product liability, tax, trusts and estates, and white collar crime. Needless to say, there are plenty of areas for lawyers in the industry to practice in.
Legal Industry Trends
While the state of the law industry has been somewhat stagnant since the recession, there is still always a need for lawyers. Many companies across all industries have lawyers on retainer or on call to provide necessary business legal advice, however in recent years, many clients have started to source more legal work in house through alternative law options. Many clients today are demanding vital shifts in the legal industry, but many law practices have been slow to adopt these changes – or have simply outright refused to change antiquated ways that have worked for so long. If a lawyer and law practice wants to stay ahead of the competition, adapting to the demands of the clients is essential. Here are the most popular demands that are hurting many law practices today due to lack of change:
- Multigenerational Workforce: For the first time in history, there are four different generations working together in one industry. In most industries, Traditionalists have retired and Baby Boomers are starting to retire – but not in the legal profession. Traditionalists, Baby Boomers, Generation X, and Millennials are all working in law industry today, resulting in many conflicting viewpoints and ways of doing things. This has led to many challenges, especially with Traditionalists and Baby Boomers refusing to adapt to the newer, modern way of running a business. This will continue to play a role in shifting workplace dynamics.
- Technology: Technology is revolutionizing every single industry today, and while most industries and businesses are being quick to adapt to these advancements, many law practices are struggling to adjust old ways that, in most lawyer’s opinions, have worked for many years. The most important technological discoveries that are shifting the legal industry include:
- Electronic Discovery: Recent changes to the Federal Rules of Civil Procedure have made electronically stored information (ESI) discoverable in litigation; these include emails, instant messages, voicemails, online calendars, and so forth. This has led to increased complexity and costs associated with this discovery process, as well as revolutionizing the way complex litigation is handled.
- Social Media: Social networking has played a vital role in a variety of legal tasks and objectives, particularly in the ways of finding new lawyers and new clients. Popular social media sites such as LinkedIn and Facebook have doubled as key ways to interact with new clients while also providing the most vital form of marketing and advertising for any law practice.
- Mobile Devices and Apps: Today, consumers are using endless amounts of mobile applications to help with day to day activities, but in the law industry, mobile apps are leading the way to new ways of working with clients. These apps are allowing many lawyers to practice law anytime and anywhere they need to, thus improving client engagement and satisfaction.
- Artificial Intelligence: While artificial intelligence for the law practice industry is still in early developmental stages, there are being huge strides in implementing a variety of AI technologies into the industry. Companies are already starting to promise artificial intelligence technologies that will be able to predict the rulings from different judges; other companies are working on AI technologies that can understand the most common tactics used by opposing counsel to help prepare a solid defense. As more and more companies work to create artificial intelligence machines to think like attorneys, it is only a matter of time before these become an integral part of the legal industry.
- Billing Models: After the 2008 recession, many businesses decided to cut back on costs – the legal sector being a big area that was cut out of many companies. With the evolution of technology, many companies were able to outsource their legal needs to other global and online alternatives. Today, many companies have the ability to bring in and retain professional legal services, however many businesses are refusing to pay the incredibly expensive hourly billing that most law practices have kept in place for so long. Many law practices are refusing to adapt to this vital client demand, resulting in the stagnant industry growth mentioned above. The law practices that are shifting their billing models are seeing success, but there is still room to grow in this area.
- Services Offered: The second biggest complaint from clients today is the inefficient delivery of legal services, as well as the lack of alternative services offered from many law practices today. Most clients of legal firms are demanding extra expertise in a few crucial areas: industry specific expertise, data privacy and security, more proactive knowledge sharing, financial expertise, and regulatory and compliance information. Many clients are demanding more than just law expertise, especially if the law firm refuses to change the billable hourly model most commonly used today.
Types of Legal Practice Loans
|Bank||6-10%||3-7 years||14-30 days|
|Cash Advance||1.16-1.55||3-24 months||1-3 days|
Legal Practice Bank Loans
Banks and credit unions offer small legal practices with good credit and an established history with affordable term loans and lines of credit that can be used for a variety of business uses. Some of these uses including purchasing real estate, refinancing real estate or commercial debt, working capital, hiring employees, paying bills, etc..
- Rates: 5-10%
- Terms: 1-25 years
Legal Practice Cash Advance
Depending on the cash-flow you see going through your business bank account, you a legal practice may be able to sell projected future revenue in exchange for immediate funding. Granted, the funding will be expensive because you may find your practice discounting future revenue at as much as 50% to the funding company, but the financing is very fast, if not almost immediate, and your credit and profitability may not be an issue if you’ve had a hard time lately.
- Factor Rates: 1.16-1.50%
- Terms: 4 months – 2 years