Costs firm Kain Knight has formed a strategic alliance with funder VFS Legal that enables law firms to raise finance against their drafted bills.
Under the arrangement, Kain Knight’s clients will be able to apply for funding from VFS Legal against bills that have been drafted and served.
VFS will loan up to 80% of the net value of the bill, with monthly interest-only payments until settlement.
Kain Knight said this allows firms “to move forward while improving the settlement negotiating position”.
Peter Petyt, chief executive officer of Kain Knight, said: “VFS Legal is playing a vital role in providing a cost-effective source of funding to our clients. VFS understands the needs of our market extremely well and knows that law firms often wait many months, even years, for their bills to be settled.
“This is why it has created an innovative product that helps bridge the funding gap without the need for a firm to renegotiate its existing banking facilities.”
Norman Kenvyn, managing director of VFS Legal, added: “Interventions by the Solicitors Regulation Authority are on the rise and no matter how profitable a law firm may be, it is the actual cash flow that is critical to enable the practice to move forward.
“It is well known how the financial climate is changing, with many banks reducing the funding options that are being made available; alternative solutions are required to bridge the cash flow gap.”
The deal is the latest sign of a re-emergence of funding since the departure of Hampshire Trust from the market four years ago. Just Costs has put in place a similar arrangement, which paid out £1m in its first three months.