Legal financing is a fairly recent phenomenon, beginning on or around 1997. In fact, it is new enough that many people do not realize that legal financing exists. The legal funding industry has risen from relative obscurity in the last few decades to the forefront as the marketplace solutions for financially troubled attorneys and their clients. The legal finance is most commonly used in personal injury cases, but may also apply to commercial disputes, civil rights cases, workers’ compensation, and structured settlement.  The amount of money that plaintiff, the victim, receives through legal financing varies widely. But generally it is around 10 to 15 percent of the expected value of judgment or settlement of their personal injury lawsuit.

The Participants for a Legal Financing Scenario:

There are four key participants who have respective roles in the legal finance sector. These fundamental participants are: the client, the broker, the underwriter and the attorney. Their interplay works towards helping personal injury to be financially strong while the settlement is due i.e. the period before any judgment is passed.

The Client

The client often referred to as the recipient or beneficiary is at once, arguably, the most critical fundamental in the legal funding industry because without them there would be nothing. These clients are the victims that are involved in personal injury claims with sufficient cause of requirement of money either to help with the costs of litigation or to help with day-to-day living expenses or to pay medical bills while the judgment of their case remains under-trial.  Unlike traditional loans, legal funding does not require the client to have a job, collateral or good credit.

The Broker

In legal finance scenario, the legal funding brokers are playing an integral part. Their role is to originate lawsuit loans for legal finance companies. These brokers are tasked with generating leads and, in turn, referring those qualified leads to the underwriter.

The broker’s value-added is can be determine on the fact that how immediate-access he is going to provide for having a considerable expertise within this particular financing zone and thereby can connect the proper client with the proper underwriter thereby minimizing transaction costs.

The Underwriter

The underwriters or liquidity providers are those legal funding companies or investors that are willing to advance i.e. lend an amount of immediate-money to plaintiffs with personal injury claims. The claims that are accepted possess sufficient merit in exchange for the right to a portion of the future proceeds of a settlement or award.

The Attorney 

The whole mechanism and process of legal finance stands on the attorney and their cooperation. A client or the victim required from the attorney: first, they have to provide the requested documents to the underwriter, in order to evaluate whether the case has sufficient merits to satisfy their respective risk models and secondly if the loan is approved, then attorney will need to sign the contract acknowledging placement of a lien on the case and agree to perform the duty of saving the client from any lose of money or award of the settlement.