Litigation funding has been widely used in the United States of America as the synonym of legal financing, settlement funding, or third party funding. They are generic jargons in law and finance which used to say that the litigant is able to finance their litigation. It is also used to mention that there is a third party funding company which finances their legal cost. In other words, those who finance the litigant provide cash advance for it, and exchange the cash for percentage share of judgment and settlement. Suppose the litigant loses eventually, the invested money cannot be withdrawn, and the financer receives nothing. Thus, the litigant does not have any obligation to pay back the money provided. Therefore, such third party will only finance merit-sufficient cases.
Fortunately, litigation funding is available in common law jurisdictions in the United States. Mostly, the funding is pursuit by those who are dealing with personal injury cases. However, those who are having commercial dispute, civil rights, and workers’ compensation cases, as well as structured settlements are also allowed to pursuit. The litigant is going to get around 10% to 15% cash advance of the expected value of judgment or settlement. Moreover, some companies even allows their clients to ask for money as much as they need, as well as to get the payout rates regarding the cases they have.
Litigation funding is superficially similar to loan; unsecured loan. However, it is not. This is a nonrecourse debt. Thus, if the case is not successful, the litigant does not need to pay for the fund.