Everyone celebrates the big win. But lawyers know that winning isn’t always the end of the road. Sometimes, payment for a settlement or judgment amount can be delayed months or even years due to processing issues, funding problems, settlement terms, or appeals. In the meantime, the firm has other cases to handle, ongoing overhead, and perhaps new expenses in finalizing and collecting on the win. Clients, too, have living expenses and other bills to pay. There’s a solution to the problem of delayed payment in these winning cases: post settlement funding for lawyers and plaintiffs.
How Post Settlement Funding Helps Firms and Their Clients
Post settlement funding offers lawyers and their clients a way to receive tomorrow’s income today. Using a settlement or verdict as collateral, attorneys and clients can receive a cash advance or line of credit for more immediate access to settlement funds and judgment awards. This allows firms and clients to move forward without risk, knowing that repayment is required only when the settlement or judgment amount is ultimately received.
What is Post Settlement Funding?
The settlement of cases involving any amount of payout takes time to finalize. Both sides must approve mutually agreeable settlement language and execute the related documents. Sometimes the settlement must get court approval as well, which adds to the timeline.
Even after all this has been completed, delays in payment of the settlement amount can and often do arise. The other party may need to liquidate assets or finance the settlement to fund payment—or even attempt to renege. Regardless of the reason for the delay, the firm or the client may have an immediate need for payment.
Post settlement funding is a type of litigation financing that bridges the gap between the settlement date and the ultimate payment of the settlement amount. Using the anticipated proceeds as collateral, the firm or client can receive payment today and then repay the amount advanced when the settlement amount is ultimately paid.
Who Uses Post Settlement Funding?
Any settled case of size is a candidate to secure post settlement funding. Several factors impact eligibility for funding and the size of the financed amount, including the terms of the settlement, the size of the settlement, and the type of case involved.
Common areas for post settlement funding include mass tort and commercial matters, but post settlement funding companies consider financing requests in a wide variety of areas:
- Commercial litigation;
- Class action lawsuits;
- DIP financing for Chapter 11 bankruptcies;
- Insolvency litigation;
- International arbitration;
- Law firm litigation, operations, and growth expenses;
- Patent litigation;
- Securities and shareholder lawsuits; and
- Competition and antitrust litigation.
How Post Settlement Funding Works
Financing of any kind requires underwriting. For post settlement funding, the financing company evaluates the basic information on the case and its settlement terms. Because the case has already been “won,” underwriting is often significantly faster than for pre settlement financing.
After evaluating and approving one or more cases as collateral, the post settlement funding company offers terms for a present advance or line of credit against the anticipated proceeds of the settlement. The law firm or its client can then use those dollars as they please—without limitation.
This type of litigation financing is non-recourse, meaning repayment of the financed amount is required only if and when the settlement is received. That makes this a no-risk financing option for law firms and clients alike.
How Post Settlement Funding Helps
Post settlement funding helps law firms meet ongoing costs. Firms must meet overhead such as payroll and other ongoing expenses regardless of when a settlement payment is actually collected. Using winning cases to create dollars today furthers the firm’s ability to meet the needs of this client, other clients, and its own personnel. Financing similarly helps clients who must meet their own financial needs, often those that were created by the facts underlying the case.