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The meaning of litigation funding

On Behalf of | May 31, 2022 | Business Litigation

Like individuals, not all businesses can afford to handle legal matters. Litigation funding in Tennessee is the alternative option to help a client file a claim right away and pay the legal fees later. Funding also provides access to a wider range of attorneys and law firms. First, they have to determine the need for this type of funding before contacting a provider.

The use of litigation funding

Some individuals and companies who want to pursue cases against other companies lack the finances to hire lawyers. They obtain the money from litigation funders who provide loans to cover the costs of pursuing lawsuits. Nonrecourse advances are repaid only after the case is won.

Determining the need for litigation funding

Commercial litigation funding is needed to guarantee the successful outcome of a lawsuit. This financing allows clients to pursue cases without using their own capital, avoid debts and bankruptcy and continue the management of their businesses.

Business litigation is often so complicated that a case could continue for a year or longer and require extensive legal resources. Not every litigation loan application is accepted for funding. Funders look for the strongest cases with the most favorable outcomes. The plaintiff has to consider the validity of the claim, the likelihood of winning the case and the amount of compensation being sought.

Some business lawsuits cost hundreds of thousands of dollars or millions of dollars to pursue in court. Litigation funding sources provide financial assistance to help plaintiffs file their lawsuits right away. Their fees are repaid on the cases they win, or in some cases, they don’t repay anything at all. Overall, litigation funding allows clients to increase their chances of winning the case.