The purpose of pre settlement lawsuit funding is to help plaintiffs meet their obligations while the case is being litigated. Clients, and by extension their counsel, are relieved of immediate financial pressure. The case can then be litigated properly, thoroughly, and to maximum value.Now an argument can be made that the cost of lawsuit funding outweighs any available increase in settlement value. And it is true that lawsuit loans carry higher interest rates than car loans or other traditional forms of financing. But analyzing only interest rates is a narrow way of looking at what lawsuit funding actually achieves for clients and their attorneys.
Have you discussed your case with an attorney and noted that the attorney expressed an interest in your case, but let you know that he/she would be unable to represent you in that matter? Did the attorney either leave you with the impression, or flatly state, that the reason that the firm would not be able to take on your case was due to a lack of finances? If so, your attorney may be in need of lawsuit funding!
It is important to keep in mind that lawsuit loans have no limitations regarding the manner in which the money may be spent. If the attorney were to obtain lawsuit funding, he/she may put that money to any use he/she deems appropriate. Such uses may include an increase in the advertising budget, an upgrade in office-equipment, etc. It is your attorney who will ultimately make the determination as to how the settlement loan will be utilized.
The minimum loan for financing a law firm is usually $100,000. (Lesser amounts may be a consideration on a case-by-case basis.) Such funding is often going to take into consideration, among other things, the firm’s accounts receivables. This form of financing is, in some aspects, no-risk financing for the law firm. This is due to the fact that the funding is secured entirely by the practice’s accounts receivables, not from the partner’s assets.
Lawsuit funding to attorneys was initially established to assist attorneys with their cash-flow. However lawsuit funding provides many additional benefits to a law firm, such as allowing them to finance expenses which will assist them in offsetting the high cost of litigating a number of cases. Once again, it is also advantageous that these are non-recourse advances. In addition to increasing cash-flow, the attorney’s business lines of credit are also enhanced. This often tips the scales in the attorney’s favor.
The vast majority of plaintiffs will have numerous expenses to which their attention must be turned prior to settling their lawsuit. Having an attorney who is able to gain access to lawsuit funding is often a tremendous benefit to several of the firm’s clients, allowing them to continue to pursue litigation when, in many instances, due to attorney’s lack of financial stability, they would have been forced to accept a lower settlement than that which they are entitled.
As in plaintiff financing, these no-risk advances do not seek statements of personal net worth. A review of the requestor’s indebtedness, listing of assets, etc. are not a prerequisite. These no-risk advances are secured principally, in many cases entirely, by the accounts receivables, not the firm’s assets. It is important to bear in mind that non-recourse attorney funding is an assignment of the attorney’s anticipated fees for both pre-and post-settlement cases.
To obtain lawsuit funding, it is customarily necessary for the attorney to “bundle” five or more cases. It will not be necessary that each of the cases be accepted for funding prior to consideration for this requested financial assistance. If you discuss your case with your attorney and your attorney expresses some reservations in representing you, principally because of their current limited financial resources, it may be time for you to suggest that the attorney consider lawsuit funding.
Applicants for lawsuit funding, otherwise known as lawsuit loans or litigation cash advances, have wide and assorted reasons for seeking pre-settlement cash against the potential recovery of their legal proceeding. In many instances, applicants require funding as quick as possible. Of course, lawsuit funding companies are in the business to help these individuals and it is in their best interest as well that the transaction take place in a timely fashion.
Unfortunately, many clients are disappointed to experience that the whole process takes longer than expected. Compounding the problem is promises of “12 hour approvals” and “get your money today” advertisements all over the internet. That is not to say that no cases are funded in the 12-24 hour time frame. In fact, lawsuit funding contracts are routinely executed on the same day as the application. And this occurs each and every day.
The problem is adjusting the applicant’s expectations because not every case is submitted, paperwork received, attorney interviewed, contract drafted and executed, and money disbursed all in one business day. In prior articles, we discussed some potential obstacles standing between the applicant and a successful funding transaction. Below, we discuss the attorney’s role in the funding process and how his participation is a necessary prerequisite for anyone hoping to obtain a lawsuit cash advance. Further, we consider the attorney’s point of view as it pertains to the process of obtaining a cash advance against a case.
The lawsuit funding process begins and ends with attorney cooperation. Because the lawsuit loan business is driven, first and foremost, by the compilation of paperwork, attorneys are usually in the best position to assist in the transaction. And the vast majority of attorneys sincerely desire to help their clients, especially if in so doing, the case results in a better outcome.
The real difference between the client and the attorney, when dealing with the steps needed to successfully pursue cash advance funding, is urgency. For the most part, attorneys do not personally feel the financial strain the applicant is feeling. He is simply conducting his work load as he runs his business. It would be unfair to ask an attorney to monitor the finances of each and every client he represents. That is simply not in the scope of his representation. Normally, neither is representing the client in a lawsuit funding transaction.
That is not to say that attorneys do not cooperate at all. When problems do arise, they usually revolve around the timing of the response. Frequently, the applicant needs the money yesterday. The attorney however is often unable to respond within the client’s immediate time frame. Applicants would do well to understand that their lawyer is trying to run a business. He has more than one case and usually a large work load. Asking the lawyer to drop everything that he is doing to help compile paperwork is not realistic.
As stated above, attorney cooperation is vital to obtaining lawsuit funding. It makes no practical sense to pester or otherwise antagonize this individual. Lawsuit loan applicants would be better served if they simply adjusted their expectations and gave their attorney some time to fit the tasks into his schedule. After all, his cooperation is crucial.
When a plaintiff obtains a lawsuit cash advance, otherwise known as pre-settlement funding, case loan companies require the signature of the attorney to finalize the transaction. Attorney participation in the lawsuit funding process is the single most important factor in obtaining cash now for your case. Below is a list of important reasons why legal finance companies require lawyers’ cooperation in connection with a lawsuit loan.
The name of the game in lawsuit funding is speed. Clients are often at the end of their financial rope when they decide to pursue a lawsuit loan against their case. The best service is the fastest service. And the best way to achieve this aim is to gain the confidence and cooperation of the attorney’s office and staff.
99% of the delays in funding are due to chasing the proper paperwork. This can be remedied with clear communication of exactly what paperwork is needed and why.
Of course, attorneys and their staff are very busy people and are not always going to drop everything they are doing to facilitate a lawsuit loan. Often support staff has to rifle through voluminous files searching for relevant documents. Through cooperation however, documents are obtained as soon as possible and the funding process runs much smoother.
Lawsuit funding companies are in the business of advancing money for profit. The real trick is not sending the money out, but getting it back in.
Normally, when the lawsuit settles, the defendant (or the insurance carrier) issues a check to the plaintiff which is deposited into the attorney’s trust account. From there, the attorney disburses the funds to his own firm, the client and any liens which are outstanding. A lawsuit loan is such a lien. Because the attorney ultimately has to pay the cash advance back to the lawsuit funding company, it is generally a good idea to have a cooperative relationship with that individual and his staff.
Unfortunately, we occasionally encounter persons operating from a scarcity mindset who, in an effort to ease their own pain, offer inaccurate information to lawsuit funding outfits. The vast majority of this misinformation is flushed out by various mechanisms, however, the essence of the problem still remains. It would be a gross understatement to state lawsuit funding collection efforts would be greatly affected if the investment and return had to be retrieved by the client himself. Instead, the funding contract almost always requires the proceeds from any settlement or award first be deposited into the attorney’s trust account and then disbursed to the interested parties. This requirement is implemented industry wide, with few exceptions.
Attorneys spend a large part of their practice following rules. They are in a privileged position to offer advice to clients and are also regulated by professional conduct standards. Rarely would an attorney stick his neck out for a client whose intentions are less than honorable. The attorney simply has nothing to gain from holding back payment on a lawsuit funding that is due.