Innovative scheme to help law firms meet Brexit client demands

Tailored approach gives firms opportunity to grow while deferring borrowing costs

Third-party funding company Doorway Capital has proposed an innovative solution to help law firms manage the fallout from the EU referendum.

With firms facing a sharp increase in instructions from clients, Doorway Capital is offering a new tailored funding commitment to help them meet the demand while continuing to grow.

The company's average initial funding facility is £1m, with a commitment to advance, on average, a further £750,000 per firm over the next 24 months.

Doorway Capital is considering entering into facilities of as little as £50,000 and as much as £10m. To allay fears of escalating borrowing costs, interest rates to law firms will be lowered to 4 per cent per annum or, in some cases, even less.

A statement from Doorway Capital read: 'While banks are already reducing their exposure to certain law firms, they too face the impact of Brexit and only time will tell how the lending market will react.

'Whether or not the high-street banks decide to increase funding to the legal services sector, it is clear that the shape and structure of loan facilities with law firms is quickly changing for the better.

'It is clear that a Brexit will trigger a surge in work for firms over the coming years, and presents an opportunity for the UK legal profession to really thrive. Having access to the right capital will be paramount.'

One business that recently took out a £2m facility will see the facility limit increase by £250,000 a quarter until it reaches £4m, enabling borrowing costs to be deferred while the firm knows its growing capital base is there for the next two years to fund its expansion.

Rather than making period repayments of capital under a traditional bank loan, law firms in these circumstances can access a growing pool of funding they know will be there.

Doorway Capital provided a £2.5m facility to law firm McMillan Williams, which enabled the firm to recruit at least 100 new staff this year and open a further six offices with a view to doubling its annual turnover.

Ian Rosenblatt, senior partner at Rosenblatt Solicitors, which also benefitted from the funding, commented:

'This facility will drive up [profit per equity partner] significantly while giving us much greater flexibility to fund future litigation. Law firms with a disputes resolution practice should at least consider Doorway Capital. Few other lenders understand civil litigation as well as them.'