By: Leah Virzi
We’re here to bail you out
Litigation financing, also referred to as law financing, legal funding, or third-party funding, are the funds that are available to plaintiffs that are currently involved in a law suit. The plaintiff can make use of the funds by paying for attorney fees, interrogation, court fees, expert witness fees and more, to make the process of making a legal claim more accessible, entirely. This will aid in paying a benefit to law firms, allowing for a larger volume of new clients to come to their firm and make a claim, resulting in more annual revenue.
For those firms that need better access to funds, litigation financing can also provide funds for attorneys to build a stronger case. This will allow for them to utilize more money to hire an expert witness, or other legal expenses, to further increase their likelihood of winning. Litigation financing also helps them keep their firm running in between cases being finalized and receiving settlements.
Some settlements may take months, if not years to resolve. This sets back an attorney and their firm, leaving them in a position where they may not be able to make ends meet. And while litigation financing is the most commonly used in the law industry, law firms can take advantage of other options, as well. These other options can include a business line of credit, a term-loan, or even an SBA loan.
How is litigation financing obtained?
Litigation financing has two subcategories; pre-settlement and post-settlement. Pre-settlement is often a loan with higher interest rates or require collateral, due to the high risk involved. A bank will seek out collateral, such as real estate, stocks or even bonds. A litigation financing lender typically will not ask for liquefiable assets, such as a collateral, but instead they may ask for your future invoices. Post-settlement loans are easier to obtain when compared to pre-settlement because there is less risk is involved. The lender knows that the funds will be repaid once the cash from the settlement comes in, so the interest rates are typically lower, and some lenders may not require collateral. In either case, whether pre- or post-settlement, the funds provided from litigation financing can support a plaintiff, attorney, or law firm in many ways. From taking care of court fees, to managing the costs of utilities to keep your firm open, litigation financing is versatile and allows you to receive justice for your claims.
What are your other options?
Other funding opportunities include a business line of credit, a term-loan, or an SBA loan. A business line of credit can be useful if a lender does not want to give you pre- or post-settlement financing. Whether you are a plaintiff that is a business owner, attorney or own a law firm, a business line of credit can help cushion the gap in cash flow, allowing you to have enough to cover the bare minimum. You can use the line of credit any time or day of the week, so you do not have to hold back on continuing the case or hiring an expert witness, when you are short on funds. A line of credit can also be useful when you may need to schmooze a client to discuss a case. A term-loan and an SBA loan are larger sums of money taken out at once. A medium or long term-loan may often have higher interest rates than an SBA or short-term loan. Such loans are most advantageous for firm owners, and all can be used to be put towards marketing, and larger expenses purchased by your firm.
Many cases have not been started, or may have been halted abruptly in the event of insufficient funds to carry the case forward. This can damage your reputation as an attorney or firm, and can leave a plaintiff feeling very unsatisfied. It only makes sense to seek out a solution to hold your business, your everyday life, or even your law firm steady, until your settlement closes. Whether it be funds from a litigation financing lender, a bank, or an online lender, your options are flexible, so you can find a way to successfully defend your case and not go broke, in the process.