Commercial Lawsuit Funding: Risk-Free Options For Businesses
A commercial lawsuit is typically brought by one harmed party, either an individual or a business entity, against another business entity. The damages alleged in these types of cases are always monetary in nature. 99% of plaintiffs in commercial lawsuits are unaware that they can obtain cash advances before their case is resolved. Cоmmеrсіаl lаwѕuіt fundіng can also termed аѕ cоmmеrсіаl lаwsuіt lоаn, commercial legal fіnаnсе or cоmmеrсіаl lаwѕuіt ѕеttlеmеnt саѕh аdvаnсе. However, they are not loans because the money does not have to be repaid until the case is won or settled.
These are cash advances or non-recourse legal loans. It is risk-free because plaintiffs owe nothing if the case is lost. When a company is named in a commercial lawsuit, the legal proceedings can jeopardize its financial stability. As you are probably aware, the legal process will take years to settle their lawsuit. And they may have immediate cash needs that cannot be postponed. In this situation, most businesses have no choice but to accept a low settlement for a case that could be worth hundreds of thousands, if not millions, of dollars. They would greatly benefit from a non-recourse legal loan.
A cash advance or loan of $100,000 to $10,000,000 helps businesses with cash flow problems and lets them focus on what they do best. Commercial lawsuit loans enable these firms or businesses to use the anticipated settlement from their case to obtain the capital they require right away.
What is basically a commercial lawsuit?
“Commercial litigation” is a formal term used primarily in U.S. law for civil lawsuits between private parties, usually corporations or other business entities, in situations where one party demands a large amount from the other party.
It is a type of litigation finance, which is an agreement in which a third party (the “litigation funder”) gives money to one party in a lawsuit (the “litigant”) so that he can pursue his case and gets a share of the money if the litigant wins or settles the case.
Other companies, however, are now offering commercial litigation funding as well. Commercial litigation funding companies charge interest rates of around 10 percent or less. It is usually less than what borrowers could get from other sources. The companies also charge fees on outstanding balances and monthly “membership” or “subscription” fees to cover administrative costs.
Role of commercial lawsuit funding company
Commercial litigation funding companies pay for the costs of the lawsuit up front. In exchange, they get a cut of whatever the plaintiff wins. The size of this share depends on how much money they have invested in the case. Commercial litigation funding companies are very selective when determining who will get their backing because most lawsuits they choose not to invest in will settle before trial, causing the commercial litigation company to lose money.
Commercial litigation funding companies either give case funding that is “one size fits all” or pay for a certain type of lawsuit. An example of the above is an investor who provides a fully collateralized loan at a rate lower than what a borrower could get from other sources. The other option is to have investors only finance cases in areas specific to their business, such as financing construction accident lawsuits only.
Impact of state laws on commercial lawsuit loans
The law varies from state to state as to whether or not commercial litigation funding is legal. Some states, such as California and Texas, allow commercial litigation funding, whereas others, like New York, place tight restrictions on the practice. For example, in Texas, it is legal for a litigant to sell their contingency rights to an outside party. In New York, on the other hand, it is against the law to join a lawsuit that has already been given to another party.
Competition for this type of funding “is very high,” with banks and hedge funds also occasionally providing litigation financing. Insurance companies may also cover some types of commercial litigation if they think the risk is worth the potential payout. The main reason why commercial litigation funding from ECO is better than insurance is that you get the money faster. Because each investor receives a certain number of cases to review, the process happens much faster than going through an insurer, who has to factor in their entire pool of insured’s and determine which claims are worth pursuing.
Types Of Commercial Litigation Funding
There are two types of commercial litigation funding: plaintiff and defendant.
In “plaintiff litigation funding,” a company agrees to finance the entire cost of bringing a lawsuit against another party. However, in exchange for a percentage of any future settlement received by the court after a company wins the case,
In “defendant litigation funding,” a company agrees to pay all the legal costs associated with defending a lawsuit brought against it in return for a percentage of the settlement or court award if the defendant is victorious.
Commercial litigation cases that may qualify for funding include, but are not limited to,
- Frаud
- Brеасh оf Contract
- Rеаl Estate Dіѕрutеѕ
- Cоnvеrѕіоn
- Cоруrіght сlаіmѕ
- Envіrоnmеntаl Litigation
- Patent or Copyright infringement & оthеr Intеllесtuаl Prореrtу
- Sесurіtіеѕ Fraud & Shаrеhоldеr Lаwѕuіtѕ
How commercial lawsuit loans are determined
Commercial litigation funding companies determine the loan amount on a case-by-case basis. Commercial litigation companies look at many different factors when deciding how much funding to provide, including:
- The merits of your claim – its strength and likelihood for success in court
- How long the case is likely to take
- Your budget and monthly living expenses
- The assets of your company
Any other sources of funding, including insurance and personal assets such as savings and property equity,
The amount of time your case is likely to take for lawsuits that are likely to end quickly, you are better off using a traditional lender.
Your likelihood of winning: If the plaintiff is unlikely to win the case, commercial litigation funding companies are less interested in providing funding.
The strength of your case: how much money you could win if the case goes to court. Commercial litigation companies are interested in cases that could bring in a lot of money, so they usually don’t pay for lawsuits where the damages aren’t that bad.
Your prior business relationship with an attorney or commercial litigation funding firm: Some specialize in specific types of cases, while others do not. Make sure you use a firm that has experience with your type of case.
Your assets: Some commercial litigation companies will only finance cases for businesses that have above-average assets they could forfeit if the plaintiff wins or settles out of court.
How to use the money from commercial lawsuit loans
Because a commercial cash advance imposes no restrictions on its use, the plaintiff is free to spend it as she sees fit. They can put the money towards:
- Pау down debt
- Maintain or invest in their own business.
- Spend the money on fixed and variable costs like payroll and operating expenses. Funds can also be used to invest in the expansion of their business, which helps keep creditors, investors, and employees on board.
- Kеер their Personal fіnаnсе and оblіgаtіоnѕ in bаlаncе
In short, businesses do not have to give up their opportunities because of the financial burden that commercial litigation can impose on them or their companies.
The benefits of using commercial litigation funding for commercial lawsuits for businesses are numerous. The most important of these are:
- The ability to keep their finances stable when commercial litigation affects the cash flow of their company.
- Commercial litigation loans are non-recourse, so there is no risk. The plaintiff firm only has to pay back the money if they settle or win in court.
- Commercial lawsuit loans are nearly limitless, ranging from $50,000 to well over $10 million for a single case.
Run Your Business As usual While Waiting For Settlement
Our pre-settlement funding company wants to give business owners the money and confidence they need to file lawsuits against people who may have done them wrong and win.
The business of commercial litigation financing has had a huge effect on the American legal system. making it more accessible for both plaintiffs and defendants alike.
When you’re fighting a major lawsuit, time is of the essence; you need as much money as possible to fund your legal defense.
During a lawsuit, businesses can use our commercial litigation to pay off debts and make more money.
If you are interested in taking out commercial lawsuit loans or would like to know if we can fund your case, call us at (800) 961-8924 or apply online.