Legal Sector Lender VFS Legal Limited Prepares for Administration: Firms Scramble for Alternative Finance
A major lender to the legal sector is on the brink of administration, leaving law firms in a state of uncertainty as they scramble to find alternative finance options. VFS Legal Limited, known for funding low value litigation claims and disbursements, has given notice of its intention to appoint an administrator, with court documents revealing the company’s financial struggles.
With a bank loan of £35.6m looming over the company and significant monthly repayments required until September 2024, VFS Legal was facing a cash flow crisis. The most recent accounts painted a bleak picture, stating that the outstanding loan posed a ‘material uncertainty’ about the company’s ability to continue operating.
Despite being owed £49.6m by law firms, the mounting debt and lack of additional financing options have put VFS Legal in a precarious position. There are concerns that administrators may seek to recover funds from law firms, potentially pushing some into insolvency due to a lack of working capital.
Steve Din, founder of Doorway Capital, revealed that several firms have already reached out to refinance their borrowings with VFS Legal. The possibility of clients being forced to repurchase disbursements at par could further exacerbate the situation for struggling law firms.
While VFS Legal’s website boasts testimonials from established legal brands like Slater and Gordon, the national firm has reassured that they have not relied on funding from VFS for some time and have planned accordingly for the lender’s administration.
As the legal sector braces for the fallout from VFS Legal’s impending administration, firms are urged to seek alternative financing options to ensure their continued operations. The future remains uncertain for both the lender and the law firms that relied on its support.