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Getting into a significant legal issue is already a massive headache. Those with legal battles hire the best lawyers to get the justice they deserve. Even with a great case, the plaintiff or the attorney might not have the funds to cover expenses during the waiting period of legal claims.
The plaintiff and attorney can coordinate with a litigation funding company to get capital. If the case involves a business, our experts can help in business litigation to get you ahead. But before transacting with a litigation funder, these questions can help you better navigate this legal finance process.
1. Do private parties only get litigation funding?
False. It has grown so much over the years. The initial purpose of commercial litigation financing is to help individual plaintiffs with commercial lawsuit claims in pursuing solid cases. Litigation funding also applies to single cases or portfolios of cases.
Litigation funders fund single cases by giving an upfront capital. You can use this money to pay fees and court expenses with a negotiated return that depends on how the case pans out.
Litigation finance is famous in areas like business restructuring and bankruptcy. Funds are available to help support claims that debtors, committees, or trustees in litigation or liquidation trusts pursue.
Legal funding is not just exclusive to plaintiffs. New applications and transaction structures are being made for law firms to prepare for the fast-changing market.
2. What expenses does litigation funding cover?
For companies, litigation funding is a source of operating or working capital. A portion of a lawsuit claim is converted into funds. When you receive the working capital, you have the flexibility to use it to cover overhead costs, expand into new markets, and promote new products.
Litigation funding covers financial support for legal expenses and costs in a dispute. The term “litigation finance” extends to a broad range of case-related expenses like expert reports and court fees. The same flexibility extends to commercial litigation funding as well.
3. Is litigation funding okay?
Yes! Litigation funding is regarded as ethical, as many legal organizations have researched it.
One common ethical issue with litigation funding is protecting the privacy of sensitive case data. Some cases do have sensitive data and details that the public better not know. If the funder is willing to hand out a non-disclosure agreement, they can use a customized agreement structure to address ethical problems.
Always ask your funder how they will comply with the ethical rules of your local jurisdiction. They should also answer every question you have about ethics with flying colors.
4. What kind of litigation funder would be ideal for my case?
A financial relationship like litigation funding lasts for years. You should know who you’re dealing with right off the bat. Plaintiffs and law firms must understand the solutions lenders may offer and the factors to consider when choosing them as a partner in legal battles.
How to Choose a Litigation Funder
Choosing a funder for your legal case takes lots of thinking and consideration. Pick one by taking a look at these factors:
- Investment Preferences: Find out the kinds of cases funders support to see where yours align. If they support cases like yours, that’s a good starting point.
- Investment Size: Funders have different amounts of investment depending on the case. A single lawsuit could get a million to a million and a half dollars of investment. Portfolio cases get more significant investments.
- Reserved Capital: Ensure the funder has enough financial resources to invest in your case. Litigation cases take years to complete. Enough funds assure you that your funder will provide funding until the case ends. This brings you away from taking lawsuit loans that have an interest rate of 27% to 60%.
- Exit Rights: Know the conditions when the funder stops the funding. Some of them commit to investing until the case ends, while some have their limits.
- Absolute Control: Some funders want to control the whole litigation process because they do the funding. Turn it down before you get trapped and have no control over your case.
- Personal Compatibility: Make sure the funding team understands your case from the inside out. They should look at the case from an outsider’s perspective. Take note of their communication approach when speaking to you.
Final Thoughts
Asking your funder about such things as litigation funding is something that you should do before considering a partnership. The stress of facing a legal battle is daunting enough. The litigation funder should know the ins and outs of litigation finance.
Here at Omni Bridgeway, we use our financial expertise to get you the litigation funding you need. Send us a message to request funding today!