How To Make Litigation Funding Work for Your Business
The cost of bringing a claim to court often stands in the way of businesses taking legal action.
If your business has found itself with a strong case to bring against a well-resourced opponent, but with no means to support the case, then litigation funding may be the ideal solution.
Third party litigation funders will provide their clients with sufficient funds to support a legal battle on the basis that, if the case is won, a return on their investment can be recouped from the winnings. The client is not liable to make any cash outlay at the start of the case, and will not have to make any payment to the funder in the event of an unsuccessful outcome.
It goes without saying that because of the significant risk involved for the funder, they tend to have very stringent guidelines relating to the cases they take on. Namely:
- Significant damages associated with the case (£1m+)
- At least a 60% chance of success
- An opponent who has sufficient resource to pay the damages in the event of a win
How to apply
It’s worth noting that because of the rigorous selection process, only 15% of cases are accepted. If you’re case doesn’t meet the above criteria, then applying is simply a waste of time.
However, if you’re seriously considering approaching a funder then the first thing to do is consult your solicitor. Because it’s in both of your best interests to select a funder who is reliable and well-resourced, you should be able to trust your solicitor to identify a reputable provider.
Should you use a funder?
If you have a solid claim that could be worth a substantial amount of money, litigation funding is definitely worth considering.
However, always do your sums, and remember that, on average, around 30 – 40% of any damages awarded if successful will probably go back to the funder as payment upon conclusion of the case. Because of this, you may need to bid for a higher settlement for the case to be worthwhile, and in turn, this may prolong the case and demand a significant amount of your time.
What should you watch out for?
As long as you select a reputable funder, then there shouldn’t be a catch.
However, because of the increased popularity of litigation funding, there are some illegitimate companies out there that are best avoided.
Before you select a funder, be sure to identify:
- The source of their funds – do they actually control the money that they propose to put forward for your case?
- The liquidity of their funds – how accessible are the funds pledged?
- That they are able to work within the required timescales?
- Are you and your lawyers able to work alongside them effectively? Although they are not allowed involvement in the case, their views do inevitably carry some weight
All in all, litigation funding is fast becoming a textbook option for businesses that wouldn’t otherwise be able to secure the funds to bring a case to court. Providing you seek the advice of a legal professional and are careful about the funder you select, it can provide an invaluable risk-free solution to you and your business.