The litigation finance industry is an industry that has been growing substantially in recent years. The growth of this industry has been seen not just in the United States but also globally, with the European Union currently reviewing the rules for litigation funding and the industry of the United Kingdom regulating itself in this regard.
According to the latest figures, the litigation finance industry reached a height of $39 billion in 2019. However, other estimates have put this number closer to the $85 billion mark in assets.
Only one thing is certain in this regard, and that is definitely that whichever way one looks at it, the industry is becoming more lucrative and popular by the year.
In the case of the United States, it is noted that while in 2019, litigation funding firms invested $2.3 billion in the litigation finance market, in 2021, this number grew to $2.8 billion.
Further to this, a survey from Westfleet Advisors has also shown that, on average, litigation finance firms saw an 18% increase in regards to assets under management from 2019 to 2020, thereby meaning that the industry is definitely on the rise.
The litigation finance industry, on the other side of the Atlantic, is also seeing tremendous growth.
In fact, the value of cases and cash held by litigation funders in the United Kingdom soared to £2 billion between 2020 and 2021 – a number that is also foreseen to grow.
Traditionally, the sector in Russia and other former Soviet Republics had been considered to be more high risk. With that being said, litigation finance is also growing in former Soviet Republics, with experienced players determining that litigation funding will become increasingly common in the years to come in such states.
At a time of global instability, individuals and firms having a certain amount of worth are keener than ever to diversify their holdings owing to stock market instability and geopolitical tensions.
Given that, more often than not, funders get to obtain 3 to 4 times their invested capital as well as the legal costs, it is more than clear that this industry is well set to keep on growing in the coming months.
But what exactly is litigation funding, and how does it work?
Simply put, litigation funding is a mechanism by which a third-party financier covers the legal costs that come with a court case or a collection of cases for law firms and corporate claimants. In return for this capital, the firm then gets part of the proceeds of the lawsuit as an interest rate added to the funded amount, resulting in a mutually beneficial arrangement between the client and the funder.
Although the process can seem to be quite complicated, it is relatively straightforward.
In order to obtain funding, in fact, all that one would need to do is to apply with a legal funding firm, and after their application is reviewed, following the necessary due diligence, then the funder will decide whether to finance the case or not.
It is important to note that not all cases get funded. In fact, more often than not, cases have to fall in within the funder’s criteria in order to obtain funding. It should also be noted that due diligence is also of paramount concern since the funder will have to check whether a favorable outcome is expected vis-à-vis the said lawsuit.
With that being said, if you’re looking to get your cases financed, do not hesitate to contact us at Baker Street Funding. At Baker Street Funding, we offer funding solutions for law firms at attorneys alike based on a 2% flat rate. In our view, this arrangement enables both attorneys as well as their clients to focus on the legal cases at hand rather than on all of the hassle that comes with raising money.
In the long run, we believe that such an arrangement will benefit both the funding firm, the attorneys as well as their clients when favorable outcomes are obtained.
But is litigation funding like a loan?
No, litigation funding is not a loan. When law firms approach banks to obtain money to fund their endeavors, the banks will usually offer two types of funding solutions: a loan or a line of credit.
Both of these instruments do not take into account the legal practice at hand, and therefore they do not usually offer enough money to cover all of the costs associated with a case or a collection of cases.
Moreover, when a firm takes up a loan, it also needs a guarantor, and within itself, this presents certain risks.
At Baker Street Funding, we want to ascertain that no firm would have to take up such risks. In fact, our legal funding solutions are solely based on the firm’s current and former case portfolios.
What are the benefits of litigation funding?
In simple terms, litigation funding gives lawsuit victims a chance – that is why the industry is growing larger by the day. The unfortunate side of obtaining justice is that the judicial process comes with its own costs, and at Baker Street Funding, we want to make sure that everyone has enough bank to obtain what is rightfully theirs when seeking justice.
While other funding solutions, such as loans, charge high-interest rates, this is not the case with litigation funding. Contrary to other financial instruments, funding agreements are also usually more flexible.
Legal funding may be used for several things, including fees and costs – something that gives attorneys and corporate clients alike the ability to withstand people who try to “lowball” when it comes to settling cases.
Legal funding also strengthens weaker parties and firms by enabling them to finance cases that they wouldn’t ordinarily be open to financing while remaining in control of the case at hand.
For this reason, legal funding is seen as a concept that balances the odds between David and Goliath in the legal world – and within itself, this is the ultimate reason why the legal finance market is expected to continue seeing tremendous growth in the months and years to come.