Law firms often walk a precarious financial line, balancing the potential for large settlements or judgments in the future against the time and expense needed to build a winning case. Discerning law firms know how to leverage pre-settlement funding to support current litigation and firm health and growth. Collateralizing winning cases before they’re resolved allows immediate access to funding without the exposure associated with self- or institutionally funded capital.
Why Law Firms Rely on Pre-Settlement Funding
Some cases are born winners—the law and the facts are with the client. But even winning cases carry expenses and require the time of lawyers and staff. An old adage says that you must have money to make money, and in this way, the practice of law typifies that saying. But where does a law firm find those initial funds?
Law firms investigating alternatives to traditional financing options increasingly turn to law firm funding. When a law firm’s lack of working capital impacts its flexibility to take new cases, to operate efficiently, or even to grow the firm, pre-settlement litigation funding is the ideal stopgap measure.
With this law firm funding alternative, the firm can use its current assets—future winning cases—to finance litigation as well as general overhead, personnel costs, and more.
What Is Pre-Settlement Funding?
Pre-settlement litigation funding is a type of law firm funding that offers a line of credit collateralized by pending cases. A law firm pledges the future proceeds from one or more pending cases as collateral for capital. By definition, law firms must repay these non-recourse loans only to the extent pledged cases are ultimately successful. This removes the borrowing risk inherent in conventional lending.
How Pre-Settlement Funding Helps Law Firms
Budgetary and bank balance constraints challenge lawyers across a variety of employment settings and practice areas. Forward-thinking lawyers know that these circumstances need not limit their potential.
Like a bridge loan, pre-settlement litigation funding provides the capital to work within a budget and even sustain and grow their legal organization, regardless of its form:
- Plaintiff law firms;
- Civil defense law firms;
- Government attorneys; and
- In-house or corporate legal departments.
Law firm funding can also provide a financial boost across all practices areas, including the following:
- Commercial litigation;
- Class action litigation;
- Chapter 11 or debtor-in-possession (DIP) matters;
- Insolvency litigation;
- International arbitration;
- Patent litigation;
- Securities and shareholder litigation; and
- Anti-trust litigation.
How to Apply for Pre-Settlement Litigation Funding
Applying for this type of law firm funding is simpler and less invasive than applying for a conventional loan. Whereas conventional lending often requires physical assets and sometimes personal guarantees as security, pre-settlement litigation funding looks only to pending cases pledged as collateral.
First, the firm identifies one or more cases anticipated to receive a favorable judgment or award and summarizes the relevant case information in general terms. Using that information, the law firm funding underwriting team evaluates each case to determine the likelihood of a successful resolution.
Once the underwriters accept a case or portfolio of cases as collateral, the litigation funding company offers the law firm an advance or line of credit secured by the accepted cases. And, again, only the favorable conclusion of a pledged case triggers the obligation to repay the amount advanced.
Would you like to learn how you can take advantage of this exciting alternative financing mechanism? For more information, contact Pravati Capital, a leading pre-settlement funding company, by calling 844-772-8284 or by completing our online contact form.