Syscap, one of the UK’s leading independent financing providers, has secured new lines of funding worth up to £50 million for law firms in need of credit.

This is the first major increase in funding to the UK’s legal sector since the collapse of Landsbanki subsidiary Key Business Finance in October last year. Key Business Finance is believed to have provided finance to more than one in ten of all UK law firms.

Syscap says that the new funding lines will come as a big relief for law firms who on July 31 will have to pay their semi-annual tax payment.

Comments Mark Gidge of Syscap: “This is first piece of good news on the funding of law firms since the credit markets froze in the wake of the collapse of Lehman Brothers in September.”

“Many perfectly credit-worthy law firms are facing huge cash flow problems as their clients slow down payments to improve their own cash position. The July tax deadline always creates a surge in demand for funding from law firms but the requirements this year are far higher than normal.”

“The very largest law firms might be able to turn to traditional bank lending to fund their tax payments but because of the shortage of credit they are finding that the margins that banks are asking for are pretty onerous. Medium sized and smaller firms are finding those terms even more uneconomic or that bank lending is just not available.”

Syscap says that in the last six months they have had approaches from increasingly large law firms for funding to help them manage their cash flow.

Syscap explains that the cyclical slowdown in some areas of work for law firms such as M&A, corporate finance, commercial and residential property has also meant that law firms are carrying lower cash reserves than they had in previous years.

Adds Mark Gidge: “There are many law firms out there with very profitable businesses that do need short term funding help. With this new credit facility now in place we hope that these firms will find it far less painful to meet their tax bills without having to take any short term cost cutting exercises that might impact on their long term growth.”