Three things all lawyers should consider when applying for litigation funding

When it comes to funding litigation, securing a deal that is affordable can be a lengthy and expensive endeavour for law firms.

That’s why we have been working to bring a dose of healthy disruption to this sector. We have been developing a new marketplace that aims to remove the cost and duplication currently involved when applying for litigation finance, by allowing lawyers to access a range of funders simultaneously.

As part of its development we have met with dozens of funders to fully understand how they assess the viability of the disputes they invest in. While there are important nuances as each funder has its own lending criteria, there are some fundamental commonalities that all lawyers should consider when applying for litigation finance.

Here are three key things for ensuring you successfully gain funding:

1.     Show that your dispute is economically viable

In-depth financial analysis of your case and its prospects are essential details that all funders will need before agreeing to invest in a dispute. 

It is ultimately your responsibility to set out the economics of the case in a way that is accessible for the funders’ investment committee so that they can see how it is being managed and the likely to make a profit.

As well as costings associated with managing the case (and additional details if it is being run on a conditional fee basis), this should include cost analysis of disbursement fees (such as e disclosure and counsel fees) and the likely financial quantum when you consider causation, loss and damage.

Funders also want to know whether the likely will be enough to repay the funder’s capital and return, as well having a clear understanding of any uplift owed to the lawyers and what is then left in damages after lawyers and funders are paid.

The clearer and more compelling you can make this business case, the more likely you are to secure a funding deal.

2.     Show the case in law and provide supporting evidence

We spoke to many funders who receive applications that fail to include details of case law which may have an impact on the dispute.

Your application should include an overview of the position of the case insofar as the law is concerned. For instance, consider whether there are other disputes of law that could affect your case. Are you awaiting a court judgment from a higher court that could have implications for your chances of success?

Funders also want to know that you have evidence that supports the merits of the dispute. If further evidence is needed, your funding application should show how you intend to source it. How much will the evidence cost to gather and what is its likely impact on the outcome of the dispute?

3.     Creating a competitive environment gets the best price

The dream scenario for securing litigation funding is having a claim which funders compete to finance. A competitive environment should mean lower fees and higher quantum – so lawyers need to consider how to create a broader appetite for their cases, and part of this is successfully attracting interest from two or more funders.

Lawyers are under a regulatory obligation to keep clients informed of their options when it comes to financing disputes. Many are reticent to do so because they fear that the process is overly long and expensive, and the chances of success too slim.

That is why FINLEGAL.IO has been launched. Our platform cuts down the wasted time spent on applying for funding cases and helps better manage expectations of clients, funders and law firms.

Part of this is our approach of having one standard form that is sent to multiple funders simultaneously. To register for our BETA programme to join with others to gain early access to this ground-breaking platform prior to launch, please get in touch.