Legal financing

Legal financing (also known as litigation financing, professional funding, settlement funding, third party funding, legal funding, and, in England and Wales, litigation funding) is the mechanism or process through which litigants (and even law firms) can finance their litigation or other legal costs through a third party funding company. These third party funding companies provide cash advance to litigants in exchange for a percentage share of the judgment or settlement. However, if the case proceeds to trial and the litigant loses, the third party funding company receives nothing and loses the money they have invested in the case. In other words, if the litigant loses, he does not have to repay the money. Accordingly, to qualify for funding with a legal financing company, a litigant's case must have sufficient merits.

Litigation funding is available in most common law jurisdictions in the United States. The process is most commonly used in personal injury cases, but may also apply to commercial disputes, civil rights cases, workers' compensation, and structured settlement.. Commercial litigation funding has become more mature in the United States with hedge funds and marketplaces funding larger commercial legal claims. The amount of money that plaintiffs receive through legal financing varies widely, but often is around 10 to 15 percent of the expected value of judgment or settlement of their personal injury lawsuit. Some companies allow individuals to request more or less money (as needed) and have varying payout rates depending on the characteristics of the case at hand.

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