Loan type
Litigation funding: money against a claim you have not won
Capital advanced against a commercial legal claim, repaid from the proceeds if you win and generally not repaid if you lose. Expensive, and your lawyer should see the agreement.
At a glance
| What it is | Capital against the proceeds of a legal claim |
|---|---|
| Is it a loan? | Generally no — typically non-recourse |
| If you lose | Usually you owe nothing |
| If you win | The funder takes an agreed share or multiple, which can be large |
| Priced as | A multiple or a percentage of recovery, not an interest rate |
| Who must review it | Your litigation counsel, before you sign |
A good fit when
You hold a strong commercial claim, the legal costs are genuinely beyond you, and the alternative is abandoning a case worth pursuing.
A poor fit when
You want working capital and the case is incidental, or the claim is speculative. This is the most expensive capital in this list.
What it is, and what it is not
A funder advances money against a commercial legal claim. If the case succeeds, they take an agreed share of the proceeds. If it fails, you typically owe nothing. That non-recourse structure is the whole product, and it is why this is not a loan and why the pricing looks nothing like lending.
The funder is pricing the probability of winning. A share that looks extraordinary against an interest rate is not necessarily unreasonable against a case that might have returned zero.
The questions that decide it
- What exactly does the funder take on a win — as a multiple, as a percentage, and in dollars across realistic outcomes? Model a modest win, not just the best case.
- What is the waterfall? Who is paid first out of proceeds: the funder, your lawyers, costs, then you? Run a scenario where you win and still receive very little.
- Who controls settlement? This is the critical one. A funder with any say over whether you accept an offer has an interest that may diverge from yours.
- What happens if the case takes years longer than planned — does the funder's share grow with time?
- Is it genuinely non-recourse, with no circumstances in which you owe money having lost?
- What does it do to privilege and disclosure in your jurisdiction? Your counsel must answer this, not the funder.
If what you actually need is working capital
Businesses sometimes reach for litigation funding because a dispute has strained cash flow, not because the case itself needs funding. Those are different problems with different answers.
- A gap that closes on a known date → line of credit or invoice factoring.
- A structural shortfall → start with choosing by the problem, and run the numbers in the affordability calculator.
- Pressure from existing debt → debt consolidation or refinancing.
Questions people actually ask
Is litigation funding a loan?
Generally not. It is typically non-recourse capital advanced against the proceeds of a claim: if you lose, you usually owe nothing. That is why it is priced as a share of recovery rather than as an interest rate.
How much does litigation funding cost?
Enough that it only makes sense where the alternative is not pursuing the claim. Pricing is a multiple or a percentage of recovery and varies with the strength and duration of the case. Model it in dollars across realistic outcomes, not just a win.
Does the funder control my case?
It depends entirely on the agreement, which is why this is the question to ask first. Any funder influence over settlement decisions creates a conflict with your own interests. Have your litigation counsel review the terms before signing.