While most small and medium sizes law firms want to grow and prosper, few have the necessary working capital to handle increased case loads or extended settlement payment. Factoring, which is the purchase and sale of accounts receivable (in this case, legal fees) at a discount at or near the time of creation (settlement), can help solve this all too familiar cash flow problem.

Financial transactions with attorneys are shaped by ethics issues. The intrinsic problem is that the non-lawyer entity has an incentive to attempt to "maximize its earnings to the detriment of the representation of clients." However, once a case has settled, these issues are not in play any longer and the ethics issues go away. Legal fees on settled cases are just like any other account receivable and can be sold, assigned, factored or otherwise financed.

Specialty finance companies like CapTran (www.captran.com) will purchase legal fees on settled cases. Most companies will deal in all fifty states.