Disbursement funding or working capital for solicitors — which is best?

Summary: Neither option is universally better. Disbursement funding preserves firm cash when case-specific costs (experts, court fees, medicals) are large or long‑dated; using your working capital is usually cheaper for small, predictable outlays but reduces liquidity and flexibility. This guide explains how each works, typical costs, compliance and client‑notification issues, a direct comparison table, an illustrative worked example, and practical steps to choose the right route — plus a quick way to get matched with specialist lenders and brokers. Ready to compare quotes? Start a Free Eligibility Check: Get Quote Now — Free Eligibility Check

We are an introducer — not a lender or financial adviser. We connect UK law firms with trusted lenders and brokers. This service is free and without obligation. Completing the enquiry form is not an application; it simply helps us match your firm with the right providers. We arrange enquiries for funding of approximately £10,000 and above.

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Quick answer: which is better?

Short answer: it depends on case size, timing and your firm’s cash buffer. Disbursement funding is often the better choice when a matter requires large or uncertain, case‑specific costs that would otherwise tie up client or firm funds for months. Using working capital typically suits firms with sufficient cash, small predictable disbursements and low operational risk.

• Choose disbursement funding when: expert fees, medicals, or court fees are large relative to your cash reserves; cases may take months to settle; you want to keep working capital available for payroll, rent or new matters.
• Choose working capital when: disbursements are small, predictable and short‑dated; your margins are tight and the cost of third‑party funding outweighs administrative/credit costs; you prefer to avoid third‑party arrangements.

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What is disbursement funding?

Disbursement funding is a finance facility (or specialist litigation funding) that pays case‑specific costs—expert reports, medical examinations, court fees, counsel fees—upfront on behalf of a firm. The funder is repaid from settlement proceeds, opponent/insurer receipts, or client payments. Facilities vary: some are provided as part of invoice finance that covers client bills and disbursements; others are specialist third‑party funders focused on litigation costs.

Pros:

• Preserves firm cash and working capital for operations and new matters.
• Can improve cashflow predictability and reduce pressure on overdrafts.
• In some models funders take non‑recourse risk to recovery (subject to terms).

Cons:

• Costs are typically higher than using available cash — fees, interest or success charges apply.
• May require client disclosure or consent and additional administration.
• Terms vary: some facilities are recourse to the firm if recoveries fail.

Typical providers include specialist litigation funders, invoice finance providers that allow advance of disbursements, and commercial lenders offering tailored facilities for law firms.

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What we mean by “using working capital”

Using working capital means paying disbursements from the firm’s own funds: operating cash, retained earnings or an existing bank overdraft. No third‑party funding arrangement is created.

Pros:

• Lower direct cost when cash is available — no lender fees or arrangement charges.
• No third‑party contract to manage and no repayment triggers beyond usual cash management.

Cons:

• Reduces liquidity available for payroll, premises, new matters or emergencies.
• May breach lending covenants if you use borrowed working capital or reduce security ratios.
• Opportunity cost of deploying funds rather than using them for growth or investment.

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Detailed comparison: disbursement funding vs working capital

At-a-glance comparison

Factor	Disbursement funding	Using working capital
Cost	Fees/interest/success fees — typically higher (indicative)	Opportunity cost or interest on existing overdraft — usually lower
Speed	Can be fast with specialist providers; subject to due diligence	Immediate (if cash available)
Balance sheet impact	Often off‑balance in some models; depends on contract	Cash decreases; no third‑party liability
Risk	May be non‑recourse or recourse depending on terms	Direct liquidity risk to firm
Client consent & comms	Usually requires disclosure; check client care rules	No third‑party disclosure, but still must follow client money rules
Admin burden	Additional paperwork and monitoring	Lower admin but more internal cash management

Which firms typically choose which?

• High‑volume PI or clinical negligence firms facing large expert and medical costs often prefer disbursement funding to preserve cash and scale intake.
• Smaller practices or those with steady, sufficient cash reserves often use working capital for small, short‑dated outlays.

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Typical costs & pricing signals (indicative only)

Pricing varies by provider, case type and recovery timeline. The figures below are illustrative and not a quote.

• Interest-style charges: 0.5%–2% per month on funded sums (depending on risk and term).
• Arrangement fees: one‑off 1%–5% of the funded amount in some facilities.
• Success or repayment fees: a percentage of recovery may be charged where funding is outcome‑linked.

Some fees may be recoverable from opponents or insurers under costs rules; others may need client consent or to be absorbed by the firm depending on retainer terms. Always confirm reclaimability with your costs budget and counsel.

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Practical considerations and compliance for solicitors

Before engaging a funder, check these points:

• Client notification and consent: confirm retainer terms and disclose third‑party funding where required by client care rules or regulatory guidance.
• Solicitors’ Accounts Rules: ensure client monies and firm monies remain segregated appropriately; avoid improper handling of client receipts.
• Conflicts of interest: ensure the funder’s involvement does not create a conflict with client interests.
• Contractual clarity: secure clear terms about recourse, repayment triggers, capped fees and exit rights.
• Accounting & tax: discuss balance sheet treatment with your accountant — some facilities have different accounting impacts.

Risk mitigation checklist:

• Obtain written facility terms and example repayment scenarios.
• Request references from other solicitors or practice managers using the funder.
• Check data security and confidentiality provisions.
• Confirm whether fees can be reclaimed from a successful costs order or insurer payment.

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Illustrative example — not a quote

Mid‑size personal injury firm needs £50,000 for expert reports and medicals, expected to be repaid in ~6 months.

Scenario	Cost over 6 months (indicative)
Disbursement funder (1.25% per month)	1.25% × 6 = 7.5% = £3,750 + arrangement fee (say 2% = £1,000) → Total ≈ £4,750
Working capital (opportunity cost or overdraft at 10% APR)	10% APR ≈ 5% for 6 months = £2,500 (plus potential covenant risk)

Conclusion: using working capital appears cheaper in pure cash terms for this example, but disbursement funding preserves £50k of cash for operations — the best choice depends on the firm’s need to keep liquidity vs. direct cost.

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How to choose the right product for your firm

Decision flow:

1. Estimate the total disbursement requirement and likely recovery timing.
2. Assess your cash buffer and operational needs (payroll, rent, new matters).
3. Compare indicative costs, including potential reclaim from opponents/insurers.
4. Check retainer and client money rules; consider client disclosure requirements.
5. Obtain 2–3 quotes and compare key terms (recourse, fees, triggers).

Questions to ask prospective funders or brokers:

• Are fees fixed, interest‑based or success‑linked?
• Is the facility recourse to the firm or non‑recourse?
• What documentation and timelines are required to draw funds?
• How do repayments interact with client receipts or costs orders?
• Can you provide client references from other solicitors?

Start a Free Eligibility Check — we’ll match you with funders and brokers who specialise in solicitor disbursements and litigation costs.

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Why use UK Business Loans to get quotes

We introduce law firms to lenders and brokers experienced in handling solicitor disbursement funding and working capital requirements. Our service helps you:

• Save time by getting multiple, relevant quotes without searching the market.
• Compare providers who understand solicitors’ accounting and client money rules.
• Keep your enquiry confidential — completing the form is not an application.

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For practical guidance on lender options for legal practices, see our specialist page for solicitors business loans: solicitors business loans.

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Frequently asked questions

What is disbursement funding for solicitors?

It’s a facility where a funder advances case‑specific costs (experts, medicals, court fees) to the firm and is repaid from settlement or client receipts according to the contract.

Will a funder take control of client settlements?

Not normally. Terms vary — some funders receive repayment directly from settlements or via the firm’s nominated accounts. Always check the funding agreement and client money rules before proceeding.

Can disbursement costs be reclaimed from opponents or insurers?

Yes, where costs orders or insurer liability exist. Whether and when you can reclaim depends on costs budgeting and the terms of any funding facility.

How quickly can I get funds?

Specialist lenders can often advance funds in days once documentation and due diligence are complete; more complex matters may take longer.

Does using a funder affect my professional obligations?

Using a funder does not remove professional obligations. You must follow client care rules, disclose third‑party funding where required and maintain appropriate client money handling.

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Next steps — quick and confidential

Ready to compare options? Complete our short enquiry form (takes under 2 minutes) and we’ll match you to specialist lenders and brokers who can provide quotes for disbursement funding and working capital. This is free and without obligation: Get Started — Free Eligibility Check

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Author & review

Written by: Sarah Bennett, specialist in business finance introductions for professional services. Published: 2025-10-29. Last reviewed: 2025-10-29. Next review due: 2026-10-29.

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Disclaimer: UK Business Loans is an introducer. We do not lend or provide regulated financial advice. We connect your enquiry to lenders and brokers. Submitting an enquiry does not guarantee funding. All finance terms are set by the lender.

1. What is disbursement funding for solicitors?
Disbursement funding is a specialist facility where a funder advances case‑specific costs (experts, medicals, court fees) to a law firm and is repaid from settlement proceeds, insurer payments or client receipts under agreed terms.

2. When should my firm use disbursement funding versus using working capital?
Choose disbursement funding when costs are large, uncertain or long‑dated and you need to preserve liquidity, and use working capital for small, predictable, short‑dated outlays where the direct funding cost would outweigh benefits.

3. How much does disbursement funding typically cost?
Costs vary by provider but are often in the range of 0.5%–2% per month on funded sums, plus one‑off arrangement fees (commonly 1%–5%) and sometimes success or repayment fees.

4. Can disbursement costs be reclaimed from opponents or insurers?
Yes—where a costs order or insurer liability applies you can often reclaim disbursements, but timing and recoverability depend on costs budgeting and the funder’s terms.

5. Will using a disbursement funder affect my obligations under the Solicitors’ Accounts Rules?
Using a funder does not remove your professional obligations—ensure client monies remain segregated, obtain any required client consent, and follow client care and accounting rules.

6. How quickly can my firm access disbursement funding?
Specialist lenders and brokers can often advance funds within days once documentation and due diligence are complete, though complex matters may take longer.

7. Is UK Business Loans a lender and what does your enquiry form do?
No—UK Business Loans is an introducer that matches your firm’s enquiry to trusted lenders and brokers, and completing the form is a confidential, non‑binding eligibility check, not a loan application.

8. Will submitting an enquiry through UK Business Loans affect our credit score?
No—submitting an enquiry does not impact your credit score; lenders or brokers may carry out credit checks only if you progress an application.

9. What information do lenders and brokers usually need to provide disbursement funding quotes?
They typically ask for the firm’s details, the total disbursement amount, case type and expected recovery timeframe, recent accounts or management figures, and ID for key personnel.

10. How should I compare and choose the right disbursement funder or working‑capital option?
Obtain 2–3 quotes and compare headline costs, recourse vs non‑recourse terms, repayment triggers, client disclosure requirements, reclaimability of fees, and the provider’s solicitor references and turnaround times.