A new funding scheme for law firms has already lent over £1m to personal injury firms since its inception three months ago to help them bridge the gap between applying for and receiving their case fees.
According to Litigation Futures, the scheme, set up by Just Costs Solicitors and Novitas Loans, allows law firms to draw down up to 70% of their likely recoverable costs once they have successfully settled personal injury, clinical negligence and industrial disease cases.
Operated online, the system works by Just Costs assessing a case and then advising Novitas Loans on what it considers to be a reasonably recoverable amount.
Novitas then makes up to 70% of this available to draw down, usually within 48 hours of a request being made. Firms are charged a fixed administration fee per case, and interest is charged on monthly basis.
Mark Hartigan, the clients services director at Just Costs said the scheme was equivalent to invoice discounting and that its popularity to date has shown how needed the scheme is.
“One of the reasons some law firms are finding themselves on the financial precipice is that they are fundamentally profitable but are not turning unbilled WIP and debtors into cash quickly enough,” said Hartigan.
20 firms have signed up for funding through the scheme so far, bringing them certainty to their cash flows, according to Hartigan, who pointed out that some large defendants have stopped making interim payments to firms.
Jason Reeve, managing director of Novitas said that following the rapid take-up of the scheme, it was looking at providing a new product providing disbursement funding for clinical negligence cases in early 2014.