In previous articles, we explore some of the most common nuances in the pre-settlement loan or legal funding business.  Because of the relative infancy of this business compared to others in the financial services industry, lawsuit funding is often misunderstood.  This post attempts to shed some light on litigation cash advances for cases as a business and outlines a few common expenses.  The goal is to help the reader better understand what goes into a lawsuit funding operation and thus feel more comfortable if the reader should utilize these services in the future.  Lawyers and clients alike would be better served by a more informed perspective.

Administrative Costs

Like all businesses, there are costs associated with providing the goods and/or services.  The following are essential to the lawsuit funding operations of many companies offering cash advances now against the future settlement of cases currently in litigation.

Staff - Obviously, a good staff is a prerequisite to any profitable venture.  The lawsuit funding business is really no different.  Keep in mind the legal cash advance business involves sometimes complex legal issues and procedures.  Because of this, experience in the legal profession is very valuable to funders.  Of course, good help is hard to find and when found, compensation is not cheap.

Information Technologies – We live in the information age as the use of email, internet and other digital mediums are utilized in an ever increasing manner.  Again, while cheaper and more efficient than what businesses employed several decades ago, the costs of a content rich website, tracking software, phone and messaging systems, email and other technologies arise on a continuous and ongoing basis, making the maintenance of these systems a monthly line item.

Rent - The lawsuit funding business is administratively exhaustive enterprise.  There is the taking of applications, tracking of paperwork, analysis of the proofs, contract drafting, more paperwork gathering, collection and a host of other tasks.  These jobs take a great deal of time and man hours.

Advertising - Having a business without anyone knowing about it is like not having a business at all.  The generation of new business is obviously the lifeblood of any business.  Lawsuit funding companies use various forms of advertising to achieve their aims.

Legal Counsel – Lawsuit loan companies utilize the services of legal counsel to analyze the merits of the cases under review.  Whether outside counsel is retained or attorney’s evaluate cases “in house”, legal opinions about the future success of pending litigation do not come cheap.

Portfolio Management – Advancing cash for profit involves the use of various financial strategies.  Litigation finance outfits employ the services of financial management professionals.  Like legal counsel discussed above, these individuals require payment commensurate with their expertise and value.

While the above list is not exhaustive, it should help the reader understand that the lawsuit funding business is really just like any other business in that money must be spent in order to provide the services offered.  For more information about the lawsuit funding or litigation loan business, keep reading the Fair Rate Funding Blog.

Thank you for your interest in the pre-settlement loan business.

pmc