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Frequently Asked Questions
Do you recommend borrowing from BridgePoint instead of a bank?
No. Banks offer the least expensive (albeit most restrictive) form of financing. We recommend that you maximize the amount of money that you could obtain from your bank subject to your comfort with their onerous monthly servicing and personal security collateral requirements. BridgePoint's loans should then be considered as a supplement rather than a substitute for bank financing. We offer a flexible solution that works with, or complements existing bank relationships.
Will BridgePoint get involved in the management of our firm's cases?
Absolutely not.
Do our plaintiff clients have any obligation to BridgePoint if we borrow against disbursements we have incurred on their case? Do we need to advise them of any loan from BridgePoint?
No, the loan is to your firm and not your client, you retain the benefit of full tax deductibility for all interest charges and do not require any signature, guarantee or acknowledgement from your clients.
What is the security required for BridgePoint's Law Firm Loans?
While loans are outstanding, borrowers assign to BridgePoint their entitlement to legal fees and the reimbursement of disbursements on a file (for Individual Loans) or a group of files (for Shelf Line borrowings). For general loans to a law firm, BridgePoint takes a security assignment of the firm's receivables subject/subordinate to pre-existing bank registrations.
Why are your rates higher than a bank?
As "senior" lenders, banks will always be the least expensive, but also the least flexible financing source for borrowers. Banks are highly restrictive in what they will consider as collateral for a loan – in the case of contingency firms this generally means attributing little if any value to your investments in active files - favouring instead lawyers' personal assets and guarantees.
BridgePoint is a "subordinate" lender, meaning our collateral security ranks behind that of the bank in the hierarchy of creditors. At the same time, we offer much greater flexibility than a bank in terms of the amount of credit we can offer, the security we can accept and the repayment terms for our loans. This flexibility is reflected in the premium of our financing rates than those offered by a bank.
How do your rates compare to other law firm lenders?
Our interest rates are lower than those of any other specialized "litigation" lenders that we are aware of.
What are your typical interest rates on Law Firm Loans? Do they vary from case to case or type of loan?
Our standard rate for Law Firm Loans is competitive with interest rates charged for subordinate loans offered to small and medium sized businesses.
Are there restrictions on the use of funds borrowed?
No. Our loan proceeds can be used for any purpose the borrower decides.
Are BridgePoint's loans generally a short term or longer term financing solution for a law firm?
Given the flexibility of the terms we can offer, our loans can serve either purpose. A firm could use our Shelf Credit Line as an effective overdraft for lean times when their bank line is fully drawn, or as a more permanent part of their balance sheet supporting a longer term growth profile.
Can I recover the interest paid to BridgePoint from my clients?
We understand that so long as the financing arrangements are properly disclosed and incorporated into the retainer agreements that counsel executes with their clients lawyers are able to pass on all or part of the cost of financing to their clients. Counsel is advised to refer to the Rules of Professional Conduct to ensure compliance with their professional obligations.
For Individual Disbursement Loans, how does BridgePoint determine the amount it will lend against a file?
The loan amount or credit value BridgePoint will offer on any file is generally equivalent to a percentage (up to 100%) of its outstanding disbursements. BridgePoint does not attribute credit value for unrealized legal fees, though these do form part of our security.
What happens if a case with an associated BridgePoint Disbursement Loan is unsuccessful?
Unlike Settlement Loans where our security is limited to recoveries from a particular file, our Law Firm Loans are guaranteed obligations of a law firm borrower regardless of the outcome any individual file securing it. If an underlying case is resolved with an insufficient recovery to repay an associated loan, the law firm is still required to satisfy the loan obligation.
I have a significant proportion of my personal wealth invested in my practice's disbursements. Why would I want to borrow from BridgePoint?
Firstly, you may wish to increase your personal financial flexibility by "repatriating" or freeing up money that is tied up in your practice.
Secondly, to take advantage of the tax savings offered by utilizing debt rather than equity financing (which is essentially what your "self financed" disbursement investments are) as previously discussed. While you may not be paying an interest charge when you re-invest your fees from settled files back into your practice, you are forgoing the income you could earn by investing that money elsewhere (an opportunity cost) while being denied for tax purposes a deduction on the interest charges as you would by having utilized borrowed funds instead. As a result, while most lawyers don't realize it, reinvested earnings are generally the most expensive form of financing available.
For your Shelf Credit Line, how are payments of interest and principal made?
Take an example of a law firm with a $100,000 fully drawn Shelf Line which we'll assume for simplicity purposes are allocated to 20 individual files via loan advances of $5,000 each. As with all of our loans, no monthly payments are required until the underlying case(s) is resolved. Therefore, when the first case settles, BridgePoint is notified and sends the firm a payout statement for that particular loan including interest. Once repaid, the $5,000 principal portion is re-applied to the available credit line is available for future draws by the firm.
BridgePoint offers a range of flexible, cost-effective alternatives to meet any law firm's funding needs. There are applications available for individual disbursement, shelf credit or general law firm financing.
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