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Michael J. Swanson, is the President, Chief Executive Officer, and a Member of the Board of Directors for Advocate Capital, Inc. You may wonder what a company that is focused on providing business capital has to do with the law. Advocate Capital, Inc. has been helping plaintiff’s attorneys get better results for their clients since 1999 by filling a somewhat vacant niche for plaintiff’s attorneys.
Mr. Swanson describes the service that Advocate Capital performs, “We help people who help people. Our clients (plaintiff’s lawyers) help people who may be going through the worst day of their lives due to the negligence of others.” These may be people who were hurt, or who had a loved one die because of negligence from someone else.
The Seventh Amendment to the Constitution gives Americans the right to a jury trial in economic disputes valued at more than $20. If a plaintiff suffers damages: vehicle or other property damage, have medical expenses, must miss work, or even dies due to the negligence of others, the Seventh Amendment offers them an opportunity for financial restitution.
The Seventh Amendment does not, however, suggest how a plaintiff should fund that lawsuit. Plaintiff’s lawyers fill that void by taking cases on a contingent basis. Mr. Swanson describes, “These attorneys agree to prosecute cases from the beginning to the end, without being paid during the process, and these cases can be quite expensive.” These cases often take from 18 months to 36 months to complete, and the attorney does not get paid during the course of the trial.
To complicate things even further, attorneys often find themselves at a disadvantage when they try to borrow capital from banks so they can prosecute cases. “Banks don’t know how to lend them money. Traditional lenders don’t recognize the contingent fee contracts to be valid receivables. If the attorney loses a case, then they get no money. These situations make banks reluctant to loan money to plaintiff’s attorneys,” Mr. Swanson states.
It also doesn’t help when some disreputable plaintiffs’ attorneys bring down the reputation of all involved in the practice. These problems can leave these practices cash poor as they try to prosecute cases for their clients.
Advocate Capital helps fill those gaps by loaning money to plaintiff’s lawyers to cover the expense of these cases, leaving law firms access to their own funds to meet their firm’s daily expenses and to help them accomplish their own goals—whatever those goals may be.
A typical lawsuit will have expenses that a loan from Advocate Capital will help them with:
- Acquiring medical records
- Locating and paying expert witnesses
- Travel expenses
- Trial exhibits
As a rule of thumb, most cases cost about 10% of a suit to run correctly. If a plaintiff is seeking $100,000 from the defendant, it will cost approximately $10,000 to put on a solid case. It is not uncommon for a law firm to have millions of dollars in several different outstanding cases—money that they will not see a return on until the case is settled.
To complicate the situation, the IRS considers that money to be assets rather than business expenses, which means the law firm is out the money up front, and they cannot use that money as a business expense to help their tax bill.
When a case is settled, the plaintiff’s lawyer gets part of the fee the defendant is required by the judge to pay. The plaintiff’s attorney is also entitled to the expenses they encumbered in prosecuting the case. Tracking expenses has always been a challenge for plaintiff’s lawyers, but Advocate Capital uses AdvoTrac to keep track of their expenses.
The technology of AdvoTrac® Case Expense Funding Service allows firms to track all expenses, and to document the expenses encumbered on behalf of a client. The process of using AdvoTrac® allows clients to maximize case efficiency, shorten close time, and stabilize their cash flow by printing copies of expenses to show clients any time of day from any location.
Advocate Capital is searching for plaintiff’s lawyers that would be a good fit. Successful law firms may be interested in joining the 475 clients already on board with Advocate Capital, which helps them make more than 2.5 million transactions to facilitate lawsuits each year.
Neil Howe is a 3-time #1 Best Selling Author, host of Expert Profiles Atlanta, Business Authority Radio and The Trust Factor Podcasts, an Online Media Strategist and Publicist, avid reader and Personal Branding advocate.