Adjacent to the legal matters undertaken by law firms, the alternative financial law firm has also seen tremendous growth. Law firms are helping businesses with the right alternative financial services. These services help businesses to meet their growing financial needs and improve their productivity in the best possible way.
Moreover, law firms also provide easier access to alternative financial services for businesses to mitigate their potential risks.
Alternative financial services by a law firm: What do you need to know about it?
However, do you know what type of alternative financial services a law firm can offer? Most of us are unaware of the types of alternative financial services a law firm offers for its clients. Fortunately, in this article, we will learn about these services.
So, here we go:
What is an alternative financial service?
Alternative financial services refer to the financial services that providers operating outside the federally insured banks offer. Commonly, alternative financial services include multiple finance providers, such as:
- Money transmitters
- Payday loan stores
- Car title lenders
- Check-cashing outlets
- Merchant cash advance
- Lines of credit
- Hard money loans
- Factoring, etc.
People find it difficult to talk about getting traditional financial services. It is mainly because of loads of paperwork and legal formalities, including this process. However, alternative financial services can help businesses and individuals to meet their financing needs without any hassle. These services also help them to bypass the restrictions of traditional financial services that usually occur in federally insured bank offers.
Types of alternative financial services a law firm can offer
A law firm can offer different types of alternative financial services. Knowing these alternative financial services offered by law firms can help you understand things better in this regard.
So, let’s get to learn about possible alternative financial services a law firm can offer below to know more:
· Merchant Cash Advance
A merchant cash advance is an alternative financial service for businesses that accept credit and debit card payments from punters. The lender in this financial service offers a company a cash advance.
The business will repay the payment with the help of its credit card or debit card sales and a fee.
This type of alternative financial service isn’t a loan, technically. Instead, the merchant cash advance provider purchases future business sales at a discount. This is a more suitable alternative financial service for small businesses that require immediate capital.
Businesses can use this financial service to manage shortages in their cash flow. This payment can also help businesses cover short-term expenses with ease.
Factoring is another alternative financial service that a law firm can offer. Factoring or debtor financing is an alternative financial service in which a company buys an invoice or debt from another company.
This financial service is also referred to as invoice discounting in different markets. Receivable accounts in this purchase get a discount to let the buyer make a profit upon a debt settlement.
Factoring essentially transfers accounts ownership to another party that will chase the debt. Therefore, it relieves the debt’s first party for less than total cash, providing them with enough working capital for continuous trading.
At the same time, the factor will chase up the overall amount and get the profit when the amount is paid.
Factoring is a common alternative financial service that exporters use to effectively increase their cash flow. Fortunately, you can also seek factoring as your alternative financial service from a law firm whenever needed to easily grow your cash flow.
· Hard Money Loans
Hard money loans are also alternative financial services type secured by a real estate property. These types of loans, also known as short-term bridge loans or last resort loans, primarily refer to the loans used in real estate transactions.
Generally, lenders in this type of loan are individuals or companies instead of federally insured banks.
A debtor usually takes out a hard money loan for a short period. This is a reliable way to generate more cash quickly with a lower LTV and higher cost ratio.
Moreover, the funding frame of hard money loans is usually shorter. It is mainly because this type of loan relies on collateral instead of the applicant’s financial position.
A law firm can usually help the borrower and creditor negotiate the hard money loan terms.
Even the default by the debtor, in this case, can result in a profitable transaction for the creditor. Therefore, creditors often don’t mind offering hard money loans to the individuals and businesses in need.
· Lines of Credit
This alternative financing option is typically a preset limit of borrowing money that you can tap into at any possible time. The debtor can keep taking the money out whenever needed until the present limit is reached.
Once the borrower repays the money, he can borrow the cash again if the line of credit is still open.
In simple words, the borrower can take money from a line of credit as many times as needed but without exceeding the set credit limit.
Other possible options of alternative financial services a law firm can offer may include asset finance and Credit cards. However, you can opt for the right alternative financial service from a law firm as per your needs.
Importance of alternative financial services
Alternative finance services help business owners to collect capital through non-traditional sources.
- If any business is in the growth phase, it’ll require a significant investment to sustain further expansion. At times, the traditional route to secure a loan may seem difficult. It is because it becomes difficult to validate its trading history for a recently established business.
- Moreover, it also becomes harder for an expanding business to forecast the required cash flow.
- With greater working capital in hand, you can have more flexible payment options thanks to alternative financial services by a law firm.
These reasons make most growing businesses consider looking for alternative financial services to fulfill their capital requirements.
The alternative financial services can help businesses get their required growth funds to bypass the hectic restrictions of high street banks and financial institutions