Before applying for lawsuit funding, every plaintiff needs to be aware of a few secrets about litigation finance. Without fully comprehending the intricacies of litigation funding, far too many plaintiffs look to litigation finance as a solution to their current cash flow issues. The terms “plaintiff litigation finance” and “secrets” used by some litigation finance companies to make money are discussed in this article. What exactly is “plaintiff litigation finance?”
A cash advance based on the merits of a lawsuit, litigation finance is not a “loan,” but rather provides a plaintiff with sufficient funding to reach the case’s conclusion, when the plaintiff will receive his or her fair share of the settlement or verdict. Instead of giving the plaintiff money as a loan, litigation finance companies invest in the lawsuit itself. A plaintiff’s prior credit or bankruptcy status is not considered when determining litigation finance. This type of funding is also referred to as: lawsuit loan, lawsuit funding, lawsuit loan, lawsuit funding, lawsuit finance, lawsuit cash advance, lawsuit loan, lawsuit cash advance, plaintiff cash advance, litigant funding, and so on.
How do litigation finance businesses generate revenue?
The interest and fees charged by every litigation finance company differ. We are all of the same opinion that, as opposed to investing in the plaintiff, litigation finance companies take on a significant amount of risk by investing in the lawsuit. As a result, the investment is only as solid as the case. We are all aware of how quickly a good case can be dismissed or a jury can award a substantial settlement in a case that we might call frivolous. We are constantly taken aback by the justice system in the United States. Consequently, litigation finance companies’ investments are risky. In order to compensate for unsuccessful cases, they must charge relatively high interest rates on successful cases. Instead of using an interest rate, some litigation finance companies use a multiplier, which is really just another way to do the same thing.
Is litigation finance subject to additional costs?
Again, every litigation finance company is unique and charges different interest and fees. The general response to this question is “yes.” These costs typically appear on the contract that the plaintiff’s attorney is required to sign, and if the case is won, they are deducted from the settlement. These fees include, but are not limited to: fees for the origination, the application, the documentation, the closing costs and fees, the penalty for paying off too early, etc. Plaintiffs should be aware of these fees so they are not surprised when they see them because they are not that different from traditional loans.
Is litigation finance an alternative method for obtaining my settlement?
Instead of replacing your settlement, litigation finance should serve as a raft that keeps you afloat while your attorney fights on your behalf. Too many plaintiffs apply for litigation finance in the misguided belief that it is merely an alternative means of receiving settlement funds. The amount owed to the litigation finance company, assuming you win your case, varies greatly depending on the time period between the date of the advance and the date you receive the settlement or verdict money. You should first try every other source of funding. The Funding Exchange (www.TheFundingExchange.com) and Expert Law (www.expertlaw.com) are two good places to get information about litigation finance.
Conclusion Before applying, as a plaintiff, you should be familiar with litigation finance and the process of obtaining funding. You will discover that litigation finance is a saving grace in the turbulent world of litigation if your expectations are appropriately set. You may be dissatisfied if you apply for litigation finance without a thorough understanding.
