It’s expensive for companies to fight a lawsuit, no matter which side of the courtroom they’re on. The Court Statistics Project found that the median costs for business contract suits, which make up 60% of the 20 million civil cases filed annually, totaled $91,000. Liability lawsuits had a median cost of $54,000.
Some businesses may be able to shoulder the expense of that burden on their own, but others who want to get their day in court while keeping their businesses up and running might consider something called commercial litigation funding.
The Idea Behind Commercial Litigation Funding
The concept behind commercial litigation funding is simple. When your company has a strong case against another business or entity, or you’re fighting a case brought against you and have a strong defense, litigation funding allows your company to leverage the case in order to get funds today, rather than waiting for a judgment or settlement. The underlying case serves as collateral, so there is no credit check, no potential foreclosure and no repossessions. Funding can be made on a recourse or non-recourse basis, and there is no need to make monthly payments.
The Many Benefits of Litigation Funding For Businesses
Even at the best of times, your business may deal with inconsistent income streams due to demand, business cycles, or even economic factors way outside your control. But during litigation, when your assets are often tied up helping your business win the case and your company faces the fallout of a competitor’s illegal actions, navigating inconsistent cash flow can be a business killer. Litigation funding relieves that pressure and can ensure you have what you need to both run your business and fight your case. In the past, we’ve funded clients whose business litigation has lasted many years, which would be all but impossible for small and median-sized businesses to sustain.
Funds received can be used to keep your business running, to supplement capital lost as you battle it out in court, and to help secure your victory in court by paying for expert litigators, reducing the likelihood and risk of premature settlement, securing expert witnesses, and so on.
Commercial Litigation Funding In The Wild
Recently, we funded litigation for a company that was dealing with a problem too many business owners do today. The founder, owner and principal of this business watched as his company’s market share and reputation plummeted thanks to the unlawful actions of a competitor. Upon filing a lawsuit against that competitor, he realized that the cost of litigation was much more than time, energy and aggravation – it was capital both to continue operations and to pay his attorneys. With Pravati’s assistance, prosecuted his company’s claims, retained the necessary experts and performed the diligence and discovery needed to mount a successful offense. And there was enough capital in the funding agreement to allow him to beef up production and marketing, resulting in a 30%-45% increase in sales — all due to litigation funding.
At the end of the day, companies not only have to evaluate whether they can carry the cost of litigation, but also whether they can afford the price of ignoring it. When either choice is burdensome, commercial litigation funding may be the answer.