Banks increasingly wary of lending to law firms

Bankruptcies over past decade show that investing in firms isn’t as safe as it used to be

With news of mass defections and bankruptcy rumors swirling through the media, it’s no wonder banks are increasingly hesitant to dole out loans to corporate law firms—some of which, such as Dewey & LeBoeuf, seem to be struggling to stay afloat.

Although banks historically have identified the legal industry as a low-risk investment, the bankruptcies and shuttering of major law firms over the past decade has essentially altered their opinions.

“Law firms are no longer as safe an investment as they were,” Alan Hodgart, managing director of Huron Consulting Group’s legal team, told the Wall Street Journal. “The idea that a law firm can’t collapse and go broke is gone.”

Experts say banks now are more closely examining law firms’ financial information, performance and partner agreements before agreeing to loans.

Read the Wall Street Journal for more information.

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