My Journey on Passive Income that 99% Population Don’t Hear About (10)

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Continuing from last post, the lawyer explained to me that typically, case funding came from the law firm itself. Law firms provided financial support to their lawyers in exchange for profit cut from each claim when the case concluded, and law firms’ funding itself was typically from wealthy partners and banks. The larger the law firm, the more funding it could provide to its lawyers, enabling them to take on more cases. This created a positive cycle where more cases led to more funding, and more funding led to more cases. Therefore, there has never been a shortage of disbursement funds in this aspect.

I then asked, “Why do you need to seek lenders on your own? Generally, when something sounds too good to be true, I have to ask why me?” The lawyer was straightforward as well, explaining that when using funds provided by the law firm, the final legal fees had to be shared with the law firm. However, if the law firm didn’t provide funding, 100% of the legal fees post case closing was earned by the lawyer entirely. He later shared various percentage split information which was also included in the videos I posted. 

I was so Intrigued! I then asked, “So why did you say yes to the law firm’s funds in the past, and why are you reconsidering now?” He explained that when he had fewer cases in the past, the overall profit was not substantial, and the difference in profit sharing wasn’t significant. As the number of cases increased, and opportunities arose to buy cases in bulk from retiring lawyers, the overall profit became much more significant. With the number of cases at this scale, the time and effort he and his team had to spend on resolving these cases increased significantly, but the profit didn’t increase much due to the profit split with the law firm in the end. So, he decided it wasn’t worth it to take on new cases if the profit sharing model continued. He had to find a way to start borrowing disbursement funds outside the law firm from elsewhere, with lenders charging a flat interest rate instead of taking a piece of his profit in the end. This way, he could earn more, and lenders could make double digit returns on their capital, making it a win-win for both parties.

Interesting! I then asked if he has lent his own money in his case pool. He said that he had already started using his own funds (in the range of 1-2M) to start buying back some of the cases from the law firm. Currently, there were still hundreds of cases funded by the law firm, and over two hundred cases were ready to be sold to him from other lawyers. He hoped to secure funding elsewhere to gradually buy back the cases from the law firm. This way, the more work he putted in, the more he earned, making it worthwhile for him to expand and scale.

I then asked why he didn’t approach the banks. He explained that the banks actually did approach him and was indeed an option, and already made him offers. However, the loan amount was limited with a few restrictions, making it less ideal. He wanted to explore other options, including the possibility of better terms with me. If the conditions were better, he would go with me, and if not, he would go with the bank – a straightforward decision.

I then inquired about the risk, returns and terms about his proposal. Till next time!

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