What Is the Nature of Lawsuit Financing?

While many people think of lawsuit financing as a "lawsuit loan", such funding is not ordinarily in the form of a loan. Instead, it is characterized as an advance, investment, or venture capital. The purpose of that characterization is to avoid state laws against charging excessive interest. While such an advance will be non-recourse in nature, meaning that the lawsuit financing company can only recover from the plaintiff's share of any settlement or verdict, and the finance company risks a loss if the ultimate verdict is in favor of the defendant, or if a verdict or settlement is too small to replay the advance, the high cost of non-recourse lawsuit financing must be considered when evaluating your funding options.