 |
Condor
International Financial Services |
|
|
||
Lawsuit
Financing: This is the fifth part of a series of articles on the specific field of Lawsuit Financing. In this part we are going to go into the details of the different pricing structures and how to present them to the client and the attorney. We are going to tell you how to coach the client to help make it easier for us to get the information we need from the attorney. We will also talk about how much your commission could be and when you get paid. THE QUESTION OF THE DAY (OR HOUR DEPENDING UPON HOW BUSY YOU ARE!) “So, how much can you loan me and what interest rate are you going to charge me?” This is a question (two in one actually) you will hear over and over again, coming from both the client and the attorney. We need to present Pre-Settlement financing in a way that differentiates it from lending, which you remember from our earlier discussion, it definitely is not. When speaking
with a potential client or attorney, use these words: “Although Please keep
in mind, no matter what the fees may be, if you lose your case,
you SO, HOW MUCH DOES THE MONEY COST? Well, if they lose their case, it costs ZERO! But let us focus
on the happy side, when they win their case, which we always Pricing structures
in this industry vary greatly. Here are some of the options WHAT TO SAY TO THE CLIENT ABOUT THE FEES Be honest, direct and do not try to gloss over what the potential amount of what the fees may be. I advise gathering the basics of a case before presenting the costs. The basics are: Gather this information while you are talking with the client (the plaintiff). Then you can give them an idea of what the fees might be, based on the length of time they need to have the money. If a client tells you they need some money now, and more in a couple of months, I recommend they receive funding for each separately. Can you guess why? If they put off the second funding, they will pay less in fees. If you recommend this strategy you will sound like a hero to your client. Another way of looking like a hero, is by being the good consultants that you are, and trying to find out if there is another way to get them some money without using Pre-Settlement funding. How? Remember, we work with all kinds of notes. Maybe this person is collecting payments from a business they sold or a house they sold, and they do not realize they can turn those payments into cash today. The last question above should reveal this. More than likely, they do not have any resources like these to turn to. Practice how you say what the fees are. Make sure to speak in short sentences. It's a lot of information to hear the first time and you don't want your client to be confused. A confused mind says "No!" You don't need to present all of the options to them. Simply give an estimate based on what they have told you. COACHING THE CLIENT ON HOW TO PRESENT PRE-SETTLEMENT FINANCING TO THEIR ATTORNEY Once you have talked to the client, have explained everything to them, they have completed a referral form with you, and they have indicated they want to go forward, you can ask them, “What is the next step?” They will probably say something like, “You tell me.” or “I don’t know. I need the money so let’s do whatever we need to.” At this point, tell the client, “I would like you to call your attorney and tell them this. Please write this down." "Mr./Ms. Attorney, you know I am having financial troubles because of this accident and my inability to work and all the bills I have run up. This is causing me great hardship. I have found somebody who is willing to help get me cash quickly. Please expect and take a call from Mr. XYZ of ABC Funding. Please cooperate with him as best you can to help me get this money as quickly as possible. Thank you for helping me with this.” If it turns out that the attorney is not cooperative, and the client calls us for advise on how to proceed, ABSOLUTELY DO NOT ADVISE THEM TO GET A NEW ATTORNEY!!!!!! We do not want to be seen as possibly interfering with the progress of the case. What you can say is: “We cannot get you any money without your attorney’s help. We don't know why your attorney is not cooperating. We have worked with other attorneys in your area without any problems.” If the client asks what to do next you can say to them, “You know, you are the client and your attorney works for you. Why don't you call your attorney again and stress how much you need this money." Then repeat, "We cannot get you any money without your attorney’s cooperation. We do not know why your attorney is not cooperating. We have worked with other attorneys in your area without any problems.” Hopefully the light bulb will go on and the client will make the effort to call their attorney or to find an attorney that will work with them and the funding source. The client has to make the decision, and the attorney has to be cooperative, otherwise the client will not get any money. You might be asking, "Why would an attorney stand in the way of their client getting the money they need?" It's a good question, with several possible answers. There is no doubt about it, Pre-Settlement lawsuit financing is expensive money. But it's often the only money that a plaintiff has access to. Besides, as a non-recourse transaction, the plaintiff has no risk involved with receiving an advance of this type. Unfortunately, not every attorney sees it that way. We all know attorneys usually make excellent incomes. Many plaintiffs are only one or two paychecks away from eviction from their home or apartment, or repossession of their car. It can be difficult for an attorney to understand that their client is often living at the brink of financial disaster. Some attorneys only see the cost of the money and not the value it brings. This lack of understanding or empathy may make them resistant to cooperating in the financing process. At times, I have found it necessary to remind an attorney that their client does not have the same financial resources they have, and that without this money the client is going to lose their house, skip a needed surgery, etc. The client may even have to file for bankruptcy. I will ask, “Isn’t a financially secure plaintiff a better plaintiff? Can’t you get a better settlement for somebody who can wait instead of somebody who is asking you to settle as quickly as you can?” Hopefully the attorney will realize that a happy client means a better settlement for the client and a larger fee for the attorney. Sometimes this does the trick and the attorney returns the funding source's phone calls and completes the information form. You can speak to an attorney in a firm, fair and friendly manner that gets the point across without creating a hostile situation. If the logic you present does not sway them, then your job is to relate that information to the plaintiff - your client - and let them decide what they want to do. At that point, you've done everything you can and your job is done for the time being. Just let the client know that you are there for them in the future. WHEN WILL YOU GET PAID? How does never sound? Not too good! Well at first glance that is true. (At second and third glance it does not sound so good either. But hang on there buckaroos!) If you are willing to take a risk you can make more in commissions than by playing it safe. Here’s how this works. Some funding sources will offer to pay your commission when the case is funded. Others will only pay your commission after the case has settled and they have collected their original advance plus fees. If you elect to receive your commission at the time of funding, it may be at a lower rate than if you wait until the case has settled. The longer the case takes to settle, the greater your commission ends up being. As an example one funding source may offer you 10% of the funded amount up front and another 10% of their profits on the back end. Let us say the advance was for 10K and the fee structure is a doubling every six months. Let us assume the case settles in twelve months which many of the cases do. If you took your commission up front, you got10% of 10K = 1K. If you decided to take your commission on the back end, you got 10% of 20K = 2K. I do not know of many places to put your money that you can double it in 12 months? However if your situation is that you need that money to live on then by all means take the commission at the time of funding. If you decide to take the commissions at the back end, you risk making nothing the same as the funding source if the case is lost. By all means, do not choose a funding source based on the commission they pay! While this may seem smart at first, it's actually a short-sighted way to run a business. Getting your transactions funded needs to be the first and foremost consideration when it comes to selecting a funding source. Choose ones to work with that gives you great service - promptly returned phone calls, good turn around time on making a decision. Reasonable decisions based on the nature and risk of the case. What if many of your transactions are being rejected by a funding source? Ask them why. Good funding sources have to make careful decisions. They are risking large sums of money. Think about it this way, if you had your money invested with them, wouldn't you want them to make careful, well researched decisions? It is considered unprofessional to submit your transaction to more than one funding source at the same time. If you think you can sneak this by them, think again. There are not that many funding sources in this particular cash flow. It doesn't take long for word to get out that you are shopping your transactions. Even worse, you risk alienating the client's attorney. Why? Because now they aren't getting phone calls and forms from one funding source, they are receiving them from two, three, or more. Will an irritated attorney ever want to send a referral to you again? I doubt it. It is acceptable to ask the first funding source you take your transaction to, to give you all of your paperwork back should they decline the transaction. If you decide to take the case to a second funding source (and you should), you can submit all of the paperwork to them. This will often save the second funding source from having to "bug" the attorney for information the attorney has already provided. Be upfront with each funding source. Tell them you are not shopping the transaction. However, if they cannot fund it, you want to know that as quickly as possible so you can take it to somebody else. When you take it to that second source, or the third, let them know where they stand. Some will not want to work them. Others will be happy to. (One person’s discounted yard sale item, is another person’s Gonga! Without the funding sources, you do not have a business. Play it straight with them. Treat them well and they will treat you well in return! In the next
article in this series, we will focus on appellate funding and funding
for the attorneys. We will also give you some marketing tips. In the meantime… Be good to yourselves, and fair with each other.
Richard
Shapiro, CFS, DCFS, is a Master Broker, a member of the Million
Dollar Club and a former visiting instructor for the Pino Training
Organization. Richard is the owner of Condor International Financial
Services, 3305 North Swan Road, Suite 109-148, Tucson, AZ 85712.
He can be reached by phone at, (520) 529-4960, or through fax at
(520) 299-3450. His E-mail address is, Condor@CondorFunding.com,
and his website is www.CondorFunding.com. |
