Litigation funding, also called Third Party Funding, might sound confusing, but it’s fairly straightforward – it describes a form of legal finance whereby a third party financially supports a claimant with the aim of getting their resources and more back if the case is successful. Want to know more?
How Litigation Funding Works
Now you know what it is, let’s discover how litigation financing works.
The return that the third party makes is usually a share of the proceeds or a pre-approved fixed percentage of the investment rather than cash itself. Litigation funding is completely legitimate and thus is set up with tight, transparent and regulated agreements that must comply with a set of industry rules and standards, such as those from formal litigation associations.
In the event of a loss, the third party loses its investment, which can make it a risky business. Third parties are usually finance specialists with knowledge of the legal landscape, like Novo Modo https://www.novo-modo.co.uk/litigation-funding.
Why Is Litigation Funding Used?
This form of legal financing helps claimants to pursue a case even if they cannot afford the associated costs of the court case. Litigation funding is commonly used commercially, as it can be a strategic optimisation tool to help save money and improve cash flow.
Furthermore, litigation funding can provide a cost-sharing model for claimants, allowing them to seek justice in circumstances where the legal costs would far outweigh the financial benefits even in a solid, strong case.
Which Sectors Does Litigation Funding Extend To?
Litigation funding is usually used in the commercial, residential and agricultural property sectors, but some investors may look further than these.
The Benefits of Litigation Financing
The biggest benefit of litigation funding is that it creates more opportunities for equity and enables justice to be served accordingly. Sadly, many cases aren’t taken to court because of the financial burden on the claimant, but investors can change the landscape and help to make this happen.
Whether it is a dispute or a more serious matter, litigation financing promotes justice for all.