If you are considering funding your litigation, you are not alone. Yearly, thousands of companies apply for litigation funding in the United States. While each company’s financial picture is different, not everyone has the answers to the most critical questions. Here, we have put together some of the top questions for you.
What type of cases get accepted for litigation funding?
At Baker Street Funding, we tend to focus more on damages than case value. Additionally, we look for any type of case that has damages or a formal damages model drawn up of at least $10 to $15 million.
The general corporate litigation claims we fund involve the following types of disputes:
High-value divorce
Appeal funding
Portfolio financing
What are the benefits of litigation financing for both attorneys and corporate claimants?
Litigation funding allows plaintiffs with insufficient funds to pursue a case to access capital that they would not otherwise be able to get. Without funding, claimants would have to draw from working capital to fund the case, which could affect the future of the business. Thus, Baker Street Funding provides not only the ability for companies to pursue litigation; hence they are able to function, but we also give them a hedge against the risk of the litigation not going their way. This type of funding also helps attorneys cover things like expert fees and other litigation-related expenses, which can climb to the hundreds of thousands or even millions of dollars in large litigation finance claims.
What are the downsides of litigation financing?
One of the downsides is that litigation finance is expensive; thus, you will pay a premium to utilize it. Additionally, not everybody qualifies for litigation financing. For example, if a company falls below our damages requirements, financing is not accessible for them.
What information do you need from me?
Initially, all litigation funding needs is an overview of the claim and whatever public documents exist relating to the client. After that, a non-disclosure agreement will be executed, and the due diligence process will start where the funder will request several documents supporting the claim.
How long does it take to close a litigation funding deal?
Litigation funding applications vary quite widely in underwriting times. Generally, the underwriting time is directly correlated to the complexity of the claim. For cases that are not complex, underwriting can take from 2 weeks to 4 weeks. The more complex the claim, the longer our due diligence process is. For complex disputes, the underwriting time frame can potentially take months.
How much does litigation funding cost?
Litigation funding costs vary because there are different complexity levels and inherent risks—financing litigation is priced on a case-by-case basis. There is no set fee structure for commercial litigation funding, and it really relies on the investment risk of the claim as well as how long the claim is estimated to take to settle.
What kind of companies can use litigation financing?
Companies of all types and sizing can utilize litigation financing. Companies with limited resources can leverage legal funding companies to help them provide capital that they do not have in order to support a claim against a deep-pocketed defendant. Companies that have significant capital but want to offset the risk of litigation or do not want to divert company assets to the litigation can choose to use litigation finance to help ease that burden.
