Sooner or later, every practitioner will face a client who begs to borrow money against their case to "tide them over." Clients with financial problems will often ask to borrow money while their case is pending. Clearly, the act of lending or advancing money to a client by the attorney involved in the case is inappropriate, unethical and illegal. No attorney should ever advance a client money, The cannons of ethics prohibit dealings of that nature with current clients, and, even if not prohibited, it is just plain bad business. New York called the lending of money to clients "maintenance" and each department has expressly forbid the practice. The ban on maintenance is found in DR5 -103(B). The first department rule, which is an exemplar, expressly forbids "any attorney, directly or indirectly, as a consideration for the placing of a retainer, to pay any expenses attending the prosecution or defense of any claim or action" Rules of the Appellate Division, First Department, 22 NYCRR sec 603.18. The evils addressed by the traditional prohibition of advancing money to clients is increasing non-meritorious litigation and the improper solicitation of retainers. The ability to finance your client during the life of the case should not be a factor in the clients determining to engage a particular attorney.
However, clients can develop legitimate financial problems that can result in true tragedies. We hear of injury victims, unable to work, losing their home to foreclosure or their business to debtors while waiting the years that a personal injury case can take. While it is improper for the lawyer to advance funds, it is perfectly ethical for the attorney to recommend a lending institution that will meet their needs, provided the recommendation is at arms length and there are no hidden promises between the lawyer and the lender.
A commercial solution that has recently swept the market is Non-Recourse Funding. Private companies will advance money to your client, secured by a lien against the proceeds of the case. However, that some of these outfits charge rates that rival the loan-sharks on the pier, as high as 18% a month, and it is perfectly legal. More reputable companies charge in the range of 3 - 4% a month, comparable to many credit cards.
Under the terms of Non-Recourse Funding, the company will advance the client a sum of money, usually percentage of the value of the case, and agree to defer repayment until the case is resolved, getting nothing if the case is lost. They are only paid back from the proceeds of the case, in effect creating a contingency lien