What to Consider When Your Client is Seeking Lawsuit Funding?

When a person decides to hire an attorney to fight for compensation in their personal injury case, oftentimes they don't understand the amount of time a case can take before a settlement is reached. While lawsuit funding can be a lifeline for some, they can be expensive, and therefore should only be considered as a last resort.  "It's a very valuable service to someone who can't get the money they need," says Mark Bello, CEO of Lawsuit Financial Corp. "If you're going to settle the case early and inexpensively, I don't recommend the service to people. I would suggest not to do it until you can't pay your bills.  But, if you decide a lawsuit funding is your only option, it's crucial to do your homework. Make sure you know the right questions to ask and what to expect so you can keep potentially prohibitive costs to a minimum. 

1. Why does your client need the money? 
While beneficial to many plaintiffs, lawsuit funding can be an expensive method of obtaining emergency cash.  Therefore, plaintiffs should discuss their specific needs to determine if lawsuit funding is the best solution.  Does the plaintiff have pressing financial issues?  What are they?  Lawsuit Financial Corporation often finds that the client is facing eviction or foreclosure or needs a car to get to work.  Daily living expenses and medical bills are other important items that can be secured with a lawsuit cash advance.  If your client is not facing these types of financial situations or can tap into other sources of revenue, such as savings, lawsuit funding is probably not the most viable option.

2. Is there potential for the lawsuit funding to increase the value of the funded case?

Lawsuit funding should be used as a strategic tool.  Financially distressed clients are not a positive influence on settlement negotiations.  When an offer is made in a time of financial stress, such as a pending foreclosure, the plaintiff is likely to seriously consider, if not accept, the offer.  When lawsuit funding relieves the immediate financial burden, even for a few months, the plaintiff and attorney “buy” precious time necessary to complete negotiations and obtain improved, case-appropriate results.

3.  Does the approved or suggested lawsuit funding fit comfortably into the projected value of the case?

The size of any lawsuit cash advance, regardless of the client’s needs or wishes, must, with potential maximum profit, fit comfortably into the projected value of the case.  By way of example, if a case has a projected case value of $50,000, a lawsuit cash advance, with projected profit, should not exceed 1/3 of potential case value.  What happens when the case, for valid reasons that were not apparent at the time of funding, settles for $30,000?  A reputable funding company such as Lawsuit Financial, will adjust its principal and profit return to comfortably fit into the settled value of the case.  Thus, in our example, principal and profit would be approximately 1/3 of the case results, or $10,000.  For this reason, it is important to make sure the funding company will not promise, in advance, to adjust rates for compromised, unexpected results.

4.  Does the lawsuit funding company have a “hands-off” policy regarding the case management process?

The lawsuit funding company NEVER becomes involved in in the case strategies, negotiations, trial, or settlement.  They only involvement is to initially review case documentation in order to determine if the case has merit and a cash advance can be provided.

5.  Does the lawsuit funding company provide its funds contingent upon the outcome of the litigation?

Most lawsuit funding is provided on a non-recourse basis, meaning that repayment is contingent upon the outcome of the case.  Furthermore, client credit-worthiness is not an issue; there are no credit checks and no monthly payments to make.  No payment of any kind is required until the funded case is successfully resolved.  If the case fails, so does the repayment; the client is not obligated to repay the cash advance. While some may feel lawsuit funding is an expensive, keep in mind that the funding company is investing its money in cases it has no control over, through attorneys it has (usually) no prior relationship with, for clients it has never met.  Then, it completely excuses the obligation if the case fails.  A reputable funding company will also compromise its return as settlement or verdict circumstances require.  Who else would offer these terms?

6.  Does the lawsuit funding company provide a profit cap on its case investment?

Most funding companies charge “front-end” broker and other administrative fees along with monthly “interest”, all of which they compound monthly.  Over a lengthy litigation process or appeal, these cost can be insurmountable.  It is imperative that choose a funding company that offers capped funding so that you and your client will know, in advance, the maximum amount your client will be obligated to pay out of case proceeds.  And, make sure they will compromise the result, when necessary, to assure that principal and profit does not excessively burden case outcome.

7.  Does the legal finance company have the experience necessary to appropriately assist you and your client through the legal funding process?

The lawsuit finance industry has experienced explosive growth over the last several years.  Now, literally hundreds of companies call themselves lawsuit funding companies, legal finance companies or some variation.  Each brings differences in legal funding and legal experience.  Mark Bello, CEO and General Counsel of Lawsuit Financial, and 37 years’ experience as a trial lawyer and over 15 years as an underwriter and situational analyst of lawsuit financial transactions. He is one of the lawsuit finance industry's most experienced professional in underwriting and placement of strategic lawsuit financial products for litigants and attorneys.

While these “considerations” are by no means inclusive, they should certainly help in choosing an appropriate lawsuit finance company that can make a significant difference in the bottom line of your client’s case. For additional assistance, feel free to contact Lawsuit Financial at 1-877-377-7848.