Lawsuit Loan Brokers – Weighing the Benefits
The purpose of this article about lawsuit loan brokers and all other articles is to educate the public about the lawsuit funding business. If the public is more aware of the business and how it works, it will benefit the lawsuit loan industry and clients alike. This article will touch on the various ways lawsuit funding operations originate cases including the use of lawsuit loan brokers. We also examine exactly what function lawsuit funding brokers serve in the business and the cost associated with this specialty.
Case Origination – Two Traditional Methods
Like most businesses where there is sufficient demand, new business is generated is a variety of ways. In the lawsuit funding business, business is generally originated either through the direct “in house” efforts or through lawsuit funding brokers. In house efforts involve a lawsuit lender’s employees marketing their services to potential clients. This can involve:
- Direct marketing on various mediums (TV, internet, email, billboards, etc.)
- Marketing to referral sources (attorneys, health care providers, etc.)
- Information marketing (such as this website and blog article(s))
Broker origination can also involve these methods but not directly. Below we discuss lawsuit loan brokers in more detail.
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Lawsuit Funding Brokers in Need
In any endeavor in which origination of new business involves work and/or expertise, there will be people willing to offer such service/expertise for profit. The business of lawsuit loans is no different.
Let us first define what we are talking about when we use the term “broker”. For purposes of the lawsuit funding industry, a lawsuit loan broker is a person(s) or entity which originates new business for lawsuit cash advance companies and serves as a liaison between the applicant and the company. As stated before, origination is a vital part of any business. Therefore, brokers want to be compensated for their efforts. After all, it is not as easy as throwing up a website and answering a few phone calls.
Lawsuit Funding Broker Origination
Originating business is essentially informing large numbers of people the services/products offered and then processing applications/orders for the product/service. The pre-settlement loan business is the same. Lawsuit loan brokers specialize in the origination of lawsuit loans for funding companies.
Of course, there are costs associated with this part of the business and ultimately, all costs are passed along to the consumer. If you are applying for a cash advance funding on your lawsuit – you are the consumer.
Yet, a lawsuit loan broker is also an entity which helps the applicant through the funding process. The broker can be a well-qualified guide and extremely valuable to an applicant. Some of the benefits of working with a lawsuit funding broker are:
Funding Broker Expertise in the Industry
Generally, people who earn a living in a certain endeavor obtain an expertise in that area. Specifically, the settlement loan business is a unique form of “specialty finance” in which common sense is mixed with intricate knowledge of the legal process. Those persons who have experience in the business (lawsuit funding brokers) are usually able to offer insight into the lawsuit loan process which otherwise, may not be available. This insight may benefit pre-settlement loan applicants.
Access to Multiple Lenders
Clients apply with a funding company and each company has their own process. The process usually involves contacting plaintiff’s attorney(s) and requesting relevant documents. For most lawsuit loan companies, the documents are reviewed, attorney conferenced on a call and a decision is made. If the case is denied, the client must then re-apply with another lawsuit funder and the process starts all over again.
You might guess law firms, who are not compensated for the time spent processing lawsuit loans, can get annoyed at the prospect of repeatedly going through the process.
Lawsuit loan brokers typically have relationships with various litigation cash advance funders. This means the attorney only compiles and sends the documents once. Also, because lawsuit funding underwriting is subjective, multiple relationships means the case is evaluated from different perspectives. Accordingly, access to multiple lenders can help an applicant with a “marginal” case obtain funding when the process would otherwise be too time and resource consuming to make sense.
Ability to Answer Questions and Personal Attention
Because lawsuit funding brokers are intimately aware of the funding process, they have the ability to answer most, if not all of funding questions. More importantly, applicants have access to lawsuit loan brokers on a more consistent basis than if they were dealing with a direct lender. More communication usually results in more successful outcomes. Since applicants can better explain their position to the brokers, and the brokers’ compensation is contingent on the applicant receiving cash for the lawsuit, settlement loan brokers are eager to help.
Of course, the benefits listed above come with a cost.
Lawsuit Funding Brokers – Examining the Cost
Lawsuit loan brokers originate business in a variety of ways. Some focus efforts on historically effective marketing mediums such as print ads or mailers. Other brokers utilize the internet and market their service on the web. Still others market to attorneys with whom the broker has a working relationship. Regardless of the way the business is generated, the brokers job is to get clients funded.
To this end, the broker must:
- Get the client to call.
- Compile the necessary paperwork.
- Choose the appropriate lawsuit loan funder and submit the case.
- Monitor the progression/status.
- Field the clients calls and questions.
- Forward the funding agreement to the client and the attorney.
- Field questions regarding the contract and its terms for funding.
- Secure and forward the lawsuit funding contract to the funding company.
- Confirm the client receives the cash advance.
Settlement Loan Broker Compensation
Because lawsuit funding brokers offer the above services, they expect to be paid for their time and expertise. Brokers charge fees which are added on to the amount of the contract. Generally, broker fees for funding contracts range from 8%-20% of the amount the client receives. Sometimes these fees are negotiated downwards on very large cases. However, it is important to remember that pre-settlement funding brokers work tirelessly answering questions from both clients and funders alike. Also, valuable time and expertise is often uncompensated as some cases are denied funding for a variety of reasons.
Effect of Settlement Funding Broker Commissions
Equally, and perhaps more important, is the effect of a broker commission on the ultimate payoff of the pre-settlement funding transaction. Because the client often needs a specific amount of money, he usually does not want the broker commission to be deducted from this amount. But because the broker must be paid, the amount of his “commission” is added to the contract amount. Yet the amount of “interest” charged for a cash advance is not calculated on the amount the client receives but on the amount of the contract. So essentially the client is paying interest on money he does not receive. So to analyze this cost is to analyze the work the broker completes and see what value a lawsuit funding broker gives.
Lawsuit Loan Brokers Takeaways
Lawsuit loan brokers serve an important function for clients and funders alike. Brokers give clients additional access and expertise that otherwise may not be available to clients dealing directly with a lender. Brokers help the best lawsuit loan companies (lenders) in the origination business so that they can focus on other aspects of the lawsuit funding industry.
Ultimately, each client must decide whether to use a broker in lawsuit loan transaction. As with everything else, the value added versus the costs associated with this decision are subjectively determined.
