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What is litigation funding?
Litigation funding (also known as litigation finance or lawsuit financing) is the process of funding companies providing capital to either plaintiffs’ attorneys or both, which allows them to leverage a portion of the ‘future asset of a lawsuit’ and acquire immediate capital. Litigation funding was almost unheard of not long ago in the U.S. but is now one of the fastest-growing financial industry sectors leading up to a $37 billion industry in 2019 alone.
How lawsuit financing helps.
Early access to capital
It helps consumers acquire immediate financial resources allowing costly litigation to occur.
Flexible financing
It provides you with opportunity to access more capital than traditional financing.
No case interference
In fact, the litigant or attorney obtains all or part of the capital from a private third-party litigation funding company with no direct interest in the case proceedings.
Law firm’s advantages.
Litigation funding assumes the financial burden of legal claims in exchange for a portion of a settlement proceeds to be recovered.
Pursue justice with the needed capital with litigation finance.
Baker Street Funding offers justice for law firms with a limited budget to pursue legitimate claims and others whose cases may be too small to pursue individually. We help law firms cover the cost of unexpected and expensive litigation as well as provide them with working capital to guarantee the continued success of their law firm.
Take on cases with large potential settlements.
Our litigation finance solutions allow law firms to leverage their receivables in order to pay for client acquisition, marketing, and expansion efforts. It also enables them to take on cases that have a large potential settlement amount but require a large amount of expensive expert testimony and research.
Continue the success of your law firm the risk-free way.
If your case ends with an unpredictable loss, you will lose no money—as the legal fees have already been paid through the financing of your litigation, you won't have to pay back the funds.
Benefits for commercial plaintiffs.
The difficulty of handling tighter legal budgets and the increasing costs of pursuing legal claims require business people to think differently about litigation. See how you may benefit from litigation funding for commercial disputes.
Get immediate liquidity.
Avoid being pressured to accept an undervalued settlement if the company's legal cost inflates at an inopportune time or the case is getting delayed.
Settle your case for more.
Take the burden of litigation costs off income statements and balance sheets, and help your company secure the bottom line with litigation finance. Financing high-profile litigation can sometimes influence the defendant to settle the case.
No-risk litigation finance is real.
A significant wake-up call for the defendant would be to realize that you are well-resourced by our investors who have thoroughly reviewed the facts of your case and are willing to spend substantial resources on a non-recourse basis.
How litigation finance works.
The litigation finance underwriting process is different from lawsuit financing transactions and a lot more complex. This includes an in-depth analysis of a case or portfolio of cases for attorneys. Usually, the due diligence period can take anywhere from a week to two weeks for law firms to two months for commercial plaintiffs. The complexity of the case dictates the speed of the process. Once that process is complete, and a contract is executed, the funds will be distributed to the attorney or client.
Qualify
Upon receiving your request, we will discuss your litigation with you to determine whether it qualifies for funding. Once qualified, we will provide you with a mutual non-disclosure agreement that will protect our communications and case information confidentiality.
Initial review
Baker Street Funding's team will then conduct an initial evaluation of your litigation to determine if it can be funded. We typically make a funding proposal for commercial claims within 2-14 days from when we receive the preliminary diligence documentation.
Term sheet
Once an initial review is complete, we will typically offer a term sheet to the client. We will then agree with the plaintiff (or attorney) on the financing terms in a term sheet which will ultimately be converted into the funding agreement moving forward. There are no term sheets for law firms.
Final due diligence
Once the term sheet is agreed to, we will complete a final due diligence check and ask the last questions that will need to be answered, which can take up to 30-45 days from our receipt of all requests.
Funding agreement
Upon acceptance of your case's investment, we will formulate a non-recourse cash advance or line of credit financing agreement for you to execute, followed by the release of the capital.
What we fund.
A firm that can help your financial needs.
Our litigation experts at Baker Street Funding strive to increase your finance options. To learn more, call (888) 711-3599 or apply online today. We’ll ask you a couple of questions about your litigation and then let you know if we can move forward, thus you don’t have to worry about going into debt, or time wasted when you’re waiting to settle your case.
FAQ.
What is litigation finance for attorneys?
Litigation finance for law firms is a type of financing service that is created specifically for contingency fee-based attorneys, representing personal injury plaintiffs and large commercial litigation lawsuits. There are multiple different subsets of funding for lawyers, including case cost financing, voucher funding, attorney lines of credit, and post-settlement fee advances.
Why not just get a bank loan?
A commercial bank loan is based on recourse, forcing the borrower to repay the principal and interest depending on the loan’s duration and maturity, regardless of the dispute’s outcome. Banking institutions do not have the lawsuit experience to support the merits of the litigation claim or the jurisdiction of the litigation counsel, so they typically require collateral and personal guarantees that would make the loans too risky and the litigation unworkable for the claimant. Because companies perceive litigation rights as an asset to be monetized without additional collateral support, such transactions can are structured as non-recourse investments.
How much do litigation funders take?
Litigation funders take an amount commensurate with the exposure of risk they take in a case. That can vary anywhere from a yearly percentage on the principal two a multiple of the principal.
Where do litigation funders get their money?
Litigation funders get their capital variety of sources including high net worth individuals financial institutions and regional banks.
Will financing my litigation help me pursue my case?
Litigation finance assists claimants in obtaining access to justice. It relieves plaintiffs of the need to finance ligation solely from cash flow, which encourages them to use litigation finance to fund meritorious cases that they would otherwise not be able to pursue. High costs and complexity of litigation create a growing demand for legal funding around the U.S. From a cost-benefit perspective, it is usually smart for a claimant to apply their case for review.
Can all businesses seek litigation finance?
All businesses seeking a minimum of $100,000 in funding can apply. Litigation financing originally became widely known since it allows small businesses to bring and stay in cases that would otherwise prove too expensive to pursue. Corporate litigation generally involves both plaintiff and defendant corporations. While many think of finance for corporate litigation as helping small businesses, large corporations have also started using this type of funding considering the benefits. The funds may be used to pay legal costs and expenses.
Are there any risks?
In essence, a litigation loan is an advance against the anticipated settlement payment or future fees. While many call these advances “litigation loans,” these advances are provided on a non-recourse basis. This means that if the litigation doesn’t successfully conclude, you do not need to pay back the advance. Litigation finance companies recognize the risk that the case will not succeed and carefully review all requests to ensure that the plaintiff can win before extending the funding requested amounts. Remember that litigation finance isn’t a loan. You don’t borrow money from a company that you have to pay back over a given number of years. You sell a part of the potential settlement proceeds (or fees) instead for an exchange of an advance.
Is litigation financing legal?
Yes. Litigation finance companies make equity investments into lawsuits. Because these are equity investments and not loans they are not subject to any regulation whether state or federal regarding lending.
Who does litigation funding assist victims of corporate misconduct?
Victims of corporate misconduct have received significant compensation through litigation finance programs, which also include settled class action attorney fees, general contractual disputes, arbitration cases, and asset recovery for the benefit of creditors of insolvent businesses and individuals.
What are the downsides?
As with any financial product, litigation finance does have a downside. The first and most talked about downside would be cost. Non-recourse financing, by nature, is an expensive option. Because of the large amount of risk assumed by the funding company, the required rate of return must be commensurate to that risk. Another downside to litigation funding is the process itself. Analyzing a claim is a laborious and time-consuming process that has no guaranteed successful outcome. There is always the chance that a litigation finance company goes through the long process of due diligence and ultimately decides not to invest into a claim.
What information does a litigation finance company need from me?
Most of the information provided to a litigation finance company will be provided through the plaintiff’s counsel. Litigation finance companies will do a deep dive into your case so that we understand the risks and potential outcomes of the litigation. We will do a thorough review of all documentation that has or will be produced in discovery in addition to one or multiple conference calls with both client and counsel. Reputable litigation finance companies like Baker Street Funding will never ask for information or documentation beyond to scope of your attorney’s work product so that all information is protected through attorney-client privilege. You should also be aware that documentation and information related to the case that is shared with a litigation funder is protected whether or not the company invests in the dispute.
How can litigation finance help my practice?
The financing of litigation can become a great asset to your practice by helping you gain access to case flow to help pay expenses while waiting for a case to settle or go to litigation. While each attorney and firm’s situation is different, we have created a bespoke solution for every different type of attorney financing need. We can help you manage your portfolio of cases and provide capital based on that portfolio to help with payroll, office space, and marketing capital, or we can provide case by case specific financing to help cover discovery costs, expert witness costs, administrative expenses, and litigation expenses.
Does the financier have autonomy over the litigation?
The litigation finance provider does not have autonomy over the litigation. We generally remain passive in the disputes we have been investing in. As per the terms of the agreement with legal counsel, the claimant maintains full autonomy in overall decision-making. We will not intervene in any way with the relationship between the claimant and its lawyer. In certain jurisdictions across the globe, Litigation Funding programs may enable funders to have a higher degree of participation in the dispute. However, we believe that our job should be to provide additional expertise and financing so that the plaintiff and the law firm can draw on if and when necessary, rather than having some other sort of influence over the proceedings.