Imagine you’re in a David vs. Goliath situation. You have a legitimate legal claim but don’t have enough money to fight your case against a powerful opponent, more so in a lengthy and expensive legal battle.
On the other hand, your opponent has all the resources to hire top-notch lawyers and drag out the legal process.
That does not mean you should just let go of your claim and let Goliath win. You still have a fighting chance if you enlist the help of litigation finance companies.
Learn more about the benefits of litigation funding in this article.
What are Litigation Finance Companies?
When you’re in a tight spot against a big player, litigation finance companies are your allies. They cover all your legal expenses — including lawyer’s fees and court costs, among others.
Think of them as your fairy godparent with a checkbook for legal cases.
Once you win or settle the case successfully, they get a share of the money awarded to you. It’s like they’re taking a gamble on your case, and if you come out on top, they share in the victory.
With litigation finance, regular people and smaller businesses are put on a level playing field with powerful companies. You get a fighting chance to pursue your claims without thinking about the costs.
4 Reasons You Should Hire Litigation Finance Firms
Given how litigation funding works, it’s easy to see why it’s a preferred funding method for many plaintiffs and businesses.
Here are a few more reasons you should consider applying for one:
It’s a great alternative to loans.
A lawsuit can easily set you back by thousands of dollars, so instead of taking out a loan to finance it, why not use the services of commercial litigation finance companies?
They will only collect their dues when the case is successful because funding is non-recourse. That means they’ll have skin in the game and do everything they can to help you win your case.
The lawsuit itself collateralizes the investment, so the personal assets of financing partners will not be put on the line in case the dispute fails. And unlike loans, litigation finance is immune from rising interest rates.
In contrast, you must repay an interest-bearing loan regardless of winning or losing the trial. Just imagine the stress you’ll potentially experience from a lost case that you still have to pay off with interest.
Even the litigation funding firm will benefit from this arrangement. In contrast to loans that are treated as operational expenses, dispute funding is treated more as revenue for the litigation finance industry, boosting the law firms’ financial picture.
It provides flexibility.
Since litigation funding is non-recourse funding, you can use it to cover all the legal fees while fighting your case. But its coverage continues beyond there. Another way to use it is to cover operational expenses to keep things running smoothly during long cases.
In some cases, the funding may be used for other contingency litigation, which is too expensive without outside financing. Thus, it allows you to take on cases you might not have been able to tackle otherwise.
With litigation finance, lawyers, claimants, and companies are given the flexibility to withstand low-ball offers, increasing the chances of a dispute being resolved based on the claim’s merits, not just because one side has more money than the other.
It mitigates risk.
Even if your case is airtight and your lawyers are top-notch, going to court is like playing a high-stakes game. There’s always a chance things might not go your way.
Litigation funders act like expert risk managers spreading their litigation finance investments across various legal disputes. They limit the risk by stepping in and covering the litigation costs. It’s like having a safety net for legal battles, reducing stress and uncertainty.
It unlocks more opportunities.
Being funded by legal finance companies gives you or your company a chance to hire top-notch lawyers that you couldn’t have afforded otherwise without breaking the bank.
Plus, it lets you scratch off some of your legal spending from your company’s expenses. After all, a top-tier law firm can cost anywhere from $1,000 to $1,700 per hour — and that still does not include other expenses like deposition, travel, court costs, and attorney fees.
Removing them from your company’s expenses means you can now focus more on creating solid legal claims to defend your position. And when that happens, you also get better odds of winning the case.
It can also free up significant cash for other priorities, helping your company become even more profitable.
Indeed, working with litigation finance companies provides invaluable benefits. But when dealing with one, be sure to understand the terms of the agreement with the finance company and consider the trade-offs involved. Make sure you’re comfortable with the arrangement before taking the leap.