As a lawyer based in the US, you might have handled many cases since the commencement of your career. Have you faced situations where your clients had approached you to seek a loan? If yes, you had definitely turned down the proposal. However, nowadays, you need not worry about your client’s financing needs, as there are firms, which provide lawsuit funding facilities for carrying out effective legal procedures and allow your client to cope up with the financial losses that occurred due to personal injury.
Lawsuit financing companies entertain the following cases:
• Breach of contract
• Wrongful death
• Civil rights lawsuits
Therefore, lawsuit funding companies provide funding to litigants for pursuing a trial in various cases. However, before referring your client to these companies, you should know some facts about the lawsuit funding industry so that you can make a fair selection.
Your Involvement is Mandatory
When a litigant approaches a lawsuit financing company, the firm first checks whether the plaintiff is represented by an attorney. After the litigant fills up the application form, the underwriters ask the lawyer to submit the case documentation for determining the strength of the case. Depending on the merit, the company makes the final decision.
Identify Lawsuit Funding Firms Carefully
Reputed lawsuit financing companies do not levy hefty fees towards fund sanctions. However, you will find that there are companies, who charge some fee towards lawsuit fund processing. Basically, these firms are brokers in disguise.
The brokerage is passed onto the applicant. Generally, a broking firm sets commission that ranges between 10% and 20% of the amount sanctioned. If your client is facing acute fund shortage, you should not suggest him or her to approach broking firms.
Know About the Application Fees
Some lawsuit financing companies do not reduce the amount of application fee if the amount sought is minimal. If your client makes delay by one day to pay the fee, these companies ask the plaintiff to pay the one day accrued interest as well.
Many litigation financing companies do not ask the applicants to pay the application fee initially in order to lure plaintiffs. Therefore, your client is required to pay the purchase price. However, when the case is settled, the litigant has to pay the interest as well.
Processing Fee Varies as per Company’s Policy
Some company levies processing fee that bear interest rate. A recent survey has found that this fee is compounded monthly at 3.5% approximately. When the case is settled within one year, your client is required to pay more than 70% along with the fee.
Your Client Can Approach another Firm for Additional Funding
Your client can approach another lawsuit financing firm for procuring addition funding. When the plaintiff fills up the application form, then the new company buys out the remaining interest of the former company.
However, here is a twist. Now, the ball is in the court of the new funding company. There is a possibility that the advance will be refinanced with a higher interest rate. When the new lawsuit funding pays off the advance offered by the previous company, the new company owns the entire responsibility.
The new company decides the repayment rate, which the plaintiff has to pay after the settlement of the case.
Do Not Allow Your Client to Approach Aggressive Funding Companies
Some companies are too ambitious for becoming successful. These companies offer more than what the litigant demands. As a result, the interest amount piles up till the case is settled. In general, your client should not draw more than 10% of the case evaluation value.
These are the facts that will help you to choose a right lawsuit funding company for your client. In addition, after your client has drawn the money, he or she can easily bear the legal expenses for attaining fast settlement.