The Basics Of Litigation Funding

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The basics of litigation funding

What is litigation funding?

In simple terms, litigation funding or litigation finance involve a third party covering part or all of the legal costs associated with a court case or several cases for an attorney or a plaintiff. It also involves providing capital to claimants for urgent needs such as the generation of revenue. In return, the litigation funding firm gets a cut from the proceeds of the lawsuit, meaning that both clients and the funder get to benefit from this mutual arrangement.

The litigation funding process is quite straightforward. All one has to do is apply with a legal funding firm, and after your application is reviewed and all the necessary due diligence is conducted, the funder will decide whether to finance your claim or not. Litigation funding, however, does not come without any sort of attachment. Strictly speaking, it is an investment, and therefore non-disclosure agreements are the rule, not the exception. 

Moreover, not all cases get financed. A thorough case analysis is usually conducted by the financier, in fact, with the intention being to make sure that the case fits the funder’s financing criteria. The due diligence process also usually takes up considerable time, with funders usually obtaining second opinions as regards whether a case should be funded or not and whether a favorable outcome is expected in relation to the said case. A firm’s investment committee usually takes the final decision when it comes to funding, and if an affirmative answer is forthcoming, both parties may then move on to sign what is known as a litigation finance agreement.

What are the benefits of litigation funding?

First things first, litigation finance enables everyone the possibility to stand a chance. Unfortunately, justice comes with its own costs, and not everyone has the bank to cover these costs. There are those who opine that litigation finance is unethical, but throughout the world, litigation funding is widely accepted to be within ethical bounds. Proof of this is the fact that an increasing number of countries are opting to introduce legislation that regulates it. Over the years, third-party funding has become more popular, and demand has continued to grow from strength to strength.

Perhaps one of the reasons resulting in growing demand is the fact that the alternatives to litigation funding are loans that charge considerable interest rates. If a loan is taken up, however, it doesn’t matter whether you win or lose. Debts will have to be repaid, no questions asked. However, in litigation finance, one is usually only obliged to pay the funding firm a cut of the proceeds if they have been successful. 

Moreover, because every case is seen on its own merits, agreements are not set in stone, and therefore, an element of flexibility also exists. This naturally means that third-party financing may be used for several things, including the fees and costs that are associated with particular cases. Within itself, litigation funding also enables parties to withstand “low-ballers” who try to settle with disingenuous offers. Better yet, funding enables weaker parties and companies to hire legal teams that would usually be out of their budget and open up new revenue streams through legal actions.

Lastly, clients remain in control of the case they’re pursuing, meaning that it is they and only they responsible for whichever strategy they decide to pursue. For this reason, it is widely seen as preferable to other options. In other words, although certain conditions always apply in litigation funding, it is reasonable to state that there are only loose strings attached.

Litigation funding offers new opportunities

Without the fear of being buried in the costs that litigation brings, litigation financing can help you pursue strong claims. For law firms, it can help you leverage your future case fees and pay for litigation-related costs on new clients.

Certainly, you could get started with financing today by applying with Baker Street Funding so that you lay the groundwork for your financial plans sooner rather than later. Then you could be in a better position.

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