Why Information is a Necessary Ingredient in Case Loans
Case loans, otherwise known as lawsuit loans, lawsuit cash advances, lawsuit funding or case funding is a complex business providing upfront cash now against the future proceeds of a claim for damages. In this post, we examine the need for information when funding enterprises offer case loans to plaintiffs.
What is a Case Loan?
Case loans, also known as lawsuit loans, are specialty financial transactions where plaintiffs sell a portion of their potential recovery in a particular lawsuit. They exist in the marketplace because legal system delays can result in delays in compensation and plaintiffs, many of whom are injured, are in financial trouble while their cases progress through the system.
Case loan are unique because they are advances on potential recoveries. If a case is lost, then the advance is not repaid. Nor is the lawsuit lender allowed to pursue plaintiffs personally for repayment. Thus, lawsuit loans are non-recourse lawsuit advances.
Case Loan Applicants Provide Information
Since every case is different, each case must be evaluated thoroughly and carefully. The vast majority of cases funded by Fair Rate Funding, and other case “loan” companies, are “run of the mill” personal injury cases. These transactions are known as personal injury loans. Examples include, slip and fall cases, motor vehicle accidents, or workers’ compensation cases.
However, lawsuits such as medical and legal malpractice, products liability, class action lawsuits and others all increase the complexity and thus the time needed to properly evaluate the risk to the funding company’s capital.
You will undoubtedly encounter many case loan advance companies touting 24 hour service. And cases are routinely funded by Fair Rate Funding within this time frame. However, many cases simply cannot be evaluated in 24 hours for various reasons.
Information and More Information
By far the largest reason for a delay in funding is the inability to quickly obtain pertinent information about the case and put it into the hands of the case loan underwriters. Keep in mind that case loan underwriters must assess the risk of investment and weigh that against the likelihood of recovery in any lawsuit. Since lawsuit loans are non-recourse, if a lawsuit is “lost”, the case loan is also lost.
Clients can certainly understand all information must be processed before a case loan can be approved. Fortunately, case loan underwriters are skilled in this type of risk assessment and usually can complete the risk analysis in a short time once the information is received.
Helping the lawsuit finance company obtain information is one way the client can really help gaining an approval. Often the attorney handling the case simply does not possess all the information. Medical reports, police or incident reports, or insurance information may exist but the attorney may not have them. After all, the attorney may not need the information right away. The attorney knows all the pertinent information will come out eventually. Yet while the attorney is in no rush, the client usually needs cash now. Clients help their own cause and their attorney as well, by gathering the information necessary for a case loan.
More than any other reason, the lack of proper paperwork is the reason why a case loan is delayed. Other reasons can also have an impact but undoubtedly most will center around receiving necessary information.
Thanks for your interest in the lawsuit funding business.
