The Harbour team speaks to law firms every day, and throughout the pandemic we were interested to hear about the many ways in which they were responding to the varied challenges faced by their clients. It was noteworthy that many law firm leaders did not adopt an introspective approach. Rather, they were quick to find new ways to support clients, for example by offering more creative fee arrangements (such as increased use of Conditional Fee Arrangements and Damages Based Agreements), expanding their teams and practice areas to provide a more holistic service, and looking internally at ways to reduce their overheads to maintain (or even lower) their charge-out rates.
Again, we find ourselves at a time when the economic outlook is uncertain, but we are sure law firm leaders will continue to be equally creative. Firms tell us they are exploring expansion into new markets or increasing their footprint of offices. Others are, after a series of recent High Court decisions, now more confident about enforcing DBAs, and so are looking to make more use of contingent fee arrangements. Some law firms and ABS’s have ambitions to merge with, or acquire, other practices. Several firms have mentioned a desire to invest in legal tech to streamline routine business for their clients, or to monetise their Work in Progress to free up capital. Other lawyers are looking to set up their own firms and need working capital as well as fees and disbursements to progress cases.
Whatever a law firm’s ambitions, capital investment is often required. Whilst that could be funded by holding back partner drawings for reinvestment in the business, it is not always easy to achieve consensus for that course – some of those funding it may not envisage themselves still in the partnership by the time the investment bears fruit by way of increased profits. Traditional lenders may also require wide-ranging security, or personal guarantees, which is not always suitable.
Over the last 18 months firms began to ask Harbour if we could offer a solution. As a privately owned business, with a wide-ranging mandate from our investors, we have a lot of flexibility in how we can deploy capital. In response, we are now offering credit facilities for law firms of different shapes and sizes. Each is tailored to a firm’s needs, and each repayment plan is different. It may simply be a fixed interest rate, or it may be a blend of an interest rate and a share of proceeds from litigation. Bullet repayments at the end of a term are possible, or we can offer a short repayment delay after which loans can begin to be repaid.
Harbour’s experience in underwriting legal risk means we can provide financing for the business of law, where traditional lenders cannot. We can take narrow security – this could be a percentage of fee income, or could be linked to the outcome of a firm’s book of contentious work.