How Safe Is Plaintiff Pre-Settlement Funding?
July 25, 2018
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Legal Financing 101

Legal financing is known by many other terms. It also goes by litigation financing, litigation funding, professional funding, settlement funding, pre-settlement funding, third-party funding, legal funding and lawsuit loans.

But they all mean the same thing: The mechanism or process through which litigants and law firms can finance litigation and legal costs through third party funding.

Like legal defense funds, which are public or private accounts set up to pay for the legal expenses of individuals or organizations who are defendants, litigation funding provides cashflow for plaintiffs and/or their attorneys. It is most often used by small-to mid-sized firms that do not have the capital to sustain prolonged cases and personal injury plaintiffs who are physically unable to work but need to make ends meet while they await compensation on their claims.

There is, however, one difference. Monies provided by legal defense funds can only be used to fund the litigation costs while money obtained from legal financing companies can be used for other things. Law firms may use legal financing to hire more staff and grow their business. Plaintiffs can use the funds to pay not only for medical expenses related to their injury but for living expenses – rent, food, cable – that they may not be able to pay due to loss of income.

Legal financing firms provide these funds, really cash advances, in exchange for a share of the eventual judgement or settlement of the claims. They are not considered loans or debt, but rather venture capital or the purchase of an asset, so they do not affect credit ratings.

These cash advances are typically provided up front in a lump sum and, best of all, are non-recourse, which means that there is no payment schedule. The legal funding firm gets a return on the investment if there is a settlement or verdict award – often years after the advance was made. But if the plaintiff loses his or her case, the legal funding company loses its investment.

That is why most legal funding firms have a review process and set criteria up that must be met for a case to be deemed meritorious of an investment.

We can tell you if your case is worth our risk. Contact one of our specialists at Elevant Finance right now and get the cash you need to see you through to your settlement or award.

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