How Fee Funding Services Work

Accessing professional services is often the best way to protect your own interests. Lawyers, accountants, businesses and education providers have the expertise you need, but they often come at a steep price.

Paying a large invoice up front can be a struggle. This may cause some people to avoid the need for professional services altogether. With fee funding, it’s possible to find funding for legal fees and other professional services, so you can access the help you need.

In this article we’ll learn more about how fee funding works, who it’s for and some of the costs associated with taking out one of these short-term loans.

Types of Fee Funding

Fee funding services provide short term loans for a range of professional services. This includes sectors like:

  1. Education Fee Funding
  • Scholarships and grants – Organisations, institutions, or individuals may offer scholarships or grants to students to cover tuition fees, textbooks, and other educational expenses.
  • Student loans – Financial institutions or government bodies may provide loans to students to cover their educational expenses. These loans typically need to be repaid after the student completes their education.
  1. Business Fee Funding
  • Investment – In the business context, fee funding may involve investors providing funds to cover various fees associated with starting or running a business. This could include incorporation fees, licensing fees, or other startup costs.
  • Venture capital – Startups may receive funding from venture capital firms to cover not only startup fees but also ongoing operational costs.
  1. Legal Fee Funding
  • Loans for legal fees – In legal matters, individuals or companies may seek funding to cover legal fees associated with a lawsuit. This can be done through third-party litigation funding, where a company or individual provides the necessary funds in exchange for a share of the settlement if the case is successful.
  1. Nonprofit and Charitable Fee Funding
  • Grant funding – Nonprofit organisations often seek grant funding to cover their operational costs, program fees, or specific project expenses. Foundations, government agencies, and other donors may provide these funds.
  1. Government Fee Funding
  • Subsidies – Governments may offer subsidies to certain industries or individuals to help cover specific fees or costs. This can be seen in agriculture, renewable energy, or other sectors where the government aims to support particular activities.

How Fee Funding Works

When you apply for fee funding, you are effectively taking out a short-term loan to pay a professional services invoice. The fee funding provider pays the invoice immediately, and you (the client) are placed on a repayment plan. Repayment plans vary between providers, but they typically last 3-12 months.

Because fee funding is a type of short-term finance, your loan may be subject to employment checks, income checks and credit checks.

You then make repayments over the life of the loan. These repayments include fees and interest. The benefit of this system is that your service provider (such as a lawyer) has been paid in full. That allows them to operate as normal, and it means you can go back to them for further services without worrying about whether your last bill has been paid.

Who Can Access Fee Funding?

Fee funding services are designed to service firms and their customers. You can access fee funding if you are:

  • A professional service provider, such as a lawyer, accountant or education organisation. These types of services often generate large invoices that clients may struggle to pay. To avoid that, you can work with a fee funding provider to allow clients to break up payments into smaller chunks.

This increases month-to-month cash flow and typically doesn’t cost the firm anything.

  • The client of a professional service firm. The firm may offer a fee funding payment option, or you can approach a fee funding service on your own. Keep in mind that some fee funding providers only provide loans for certain types of professional services. 

Some may specialise in loans for legal fees, while others may provide funding for education, grants, government work or business fees.

What are the Costs Associated with Fee Funding?

Each fee funding service operates differently. They all have their own fee and interest structure, but you should expect to pay fees like:

  • Establishment fees – These fees cover the cost of establishing the loan. This typically includes the cost of assessing your application, filing paperwork, paying your bill and managing the account.
  • Interest – Just like other short-term loans, fee funding carries interest. The interest rate varies depending on size and length of the loan, your repayments, and your creditworthiness. Because fee funding is intended to be very short term, the interest you pay on your loan is often a small fraction of the total cost.
  • Break fees – You may find yourself in a position to pay out your loan early. If you do, some fee funding services may charge a “break” fee. This helps the service provider recover the money they’re losing because you are paying off the loan early, and you won’t continue making interest payments. Not all providers charge a break fee, and it can be a good idea to choose a service that doesn’t have these types of fees.
  • Administration fees – Managing your loan requires a little bit of effort from the fee funding provider. As the client, you may find yourself paying fees (such as a monthly charge) to cover administrative costs. It’s a good idea to look for a provider that doesn’t charge these types of fees, as they can significantly increase the total repayments over the life of the loan.

Do your research when looking for a fee funding service. Not all providers are created equal, and it’s possible to find a service that charges few or no fees, so you’ll only be expected to pay interest on the loan.