If you have been wronged by the negligence or wrongful behavior of a company, you know how costly this can be. It can disrupt your life and your income. It is expensive to defend your rights and recover the money you lost. Even if your attorney agrees to a contingent fee (where he is paid only if you win), pursuing a lawsuit can be costly.

Unfortunately, regardless of how deserving you might be, it can take a long time for you to recover money in a lawsuit. The average commercial lawsuit takes 18 months from start to finish. Many wronged people find themselves in a difficult position. They have suffered big losses and have to wait a long time to recover those losses. Of course, your daily expenses, your house payment, your car payment, and your children’s needs can’t wait.

You might wonder why an investor would give you a cash advance on your settlement or verdict if there is a chance that it won’t be repaid because you might lose your case. Investors know that there are many plaintiffs who leave cash on the table when negotiating settlements with defendants. They also know that a modest advance early in the case can make the difference between a small settlement and a big win. They know that, in most of the cases where they pay an advance, they will receive their money back plus a fee. Yes, they will lose their advances in some cases; but overall they will make a profit.

Some people like to call pre-settlement advances “lawsuit loans,” or they compare them to payday loans. This is misleading. In a loan, the borrower always has to repay the lender the amount of the loan plus interest. When you take a loan, you are making a personal guarantee that you will repay the borrower.

In a presettlement advance, the guarantee of repayment comes from the value of your lawsuit, not from you personally. When you receive a pre-settlement advance, you repay the investor only if you win your case or get a settlement. If you receive nothing from your lawsuit, you pay nothing back. And if you receive only a small settlement or recovery, the investor will be paid only if there is something left over after your lawyer has been paid.

If you lose your case, you don’t have to repay your investor. As explained above, the money you receive from the investor is a non-recourse advance. The investor’s right to repayment depends on the outcome of your lawsuit, not on your personal promise. If the lawsuit does not produce a recovery, the investor cannot demand repayment.

How does Commercial Litigation Funding work?

The process of commercial litigation funding is simple. It starts when an individual or business has reason to be compensated by another company, manufacturer or other entity after suffering loss or damage that the organization is liable for.

Next, the individual or business must find an attorney with experience in fighting similar cases.  

Once this individual or business—now considered a plaintiff—finds a commercial litigator to take their case, it can be a while before a settlement is reached or the suit is adjudicated. During this long wait and court battle, the plaintiff may find that he or she needs to pay attorney fees to assist with the high costs of litigating a high-value commercial claim.

Likewise, the law firm fighting on the side of the plaintiff may need financing to continue pursuing a fair settlement, researching the case and paying the various staff members who support the litigation.

When these financial breaking points are hit, or they can be seen on the horizon, either the law firm or the plaintiff can reach out to TownCenter Partners LLC, TCP, for non-recourse or recourse commercial litigation funding.

What is the Process for Getting Funding?

1. An individual or business has reason to be compensated by another company, manufacturer or other entity after suffering loss or damage at their hands.

2. This individual or business—now considered a plaintiff—finds a commercial litigator to take their case.

3. The plaintiff finds that he or she needs to pay attorney fees to assist with the high costs of litigating a high-value commercial claim or the law firm fighting on the side of the plaintiff needs financing to continue pursuing a fair settlement.

4. The law firm or the plaintiff reaches out to TownCenter Partners LLC for commercial litigation funding.

5. The commercial underwriting team at TCP reviews the entire case in order to determine the likelihood of its winning. This determines whether the funding will get approved.

6. Once approved, TCP advances the funds to the law firm or plaintiff.

7. After the settlement is reached or the case is adjudicated and the award is paid to the lawyer’s trust fund, the capital invested by TCP, as well as the agreed-upon returns is paid out of the settlement funds.

Once your application for an advance is approved, you can receive the money very quickly, usually within 24-48 hours. The amount of the advance can be sent directly to your bank account, or, if you prefer, you can be sent a check by an overnight delivery service, such as Federal Express.

The time between your application and approval can vary, depending on how far along you are in your lawsuit. As noted above, when reviewing your application, the investor will want to consider information about the economic and medical costs of your injury, the evidence you have to prove your case, and the insurance resources that the defendant has. All of this information is developed by your attorney during the pre-trial phase of your lawsuit. If the information is readily available at the time you apply, the investor’s decision can be made quickly. If you are at a very early stage of the lawsuit and this information is not fully developed, the investor’s assessment will take longer.

Once you are approved, you will be asked to sign a contract that will determine the conditions of the advance and the amount you will have to repay if you get a settlement or verdict. You should review this contract carefully and get legal advice about it. That legal advice can come from your attorney in the lawsuit and/or another attorney. It is worth taking the time to carefully review the contract before signing it.

A loan is the alternative to a pre-settlement advance. Any loan involves some cost to you, including interest and other fees that the lender will demand. Of course, when you take a loan, you have a legal obligation to repay the lender, regardless of whether your lawsuit succeeds.

Different kinds of loans have different costs. If you are considering any particular kind of loan as an alternative to a pre-settlement advance, you should make sure you understand the cost of that loan and compare it to the cost of an advance.

If you do borrow money instead of taking an advance, you have two basic alternatives: borrow using your own assets and borrow using the lenders assets. If you use your own assets, your costs will usually be lower. For example, you can take money out of a savings account or borrow against a retirement account or pension. These loans usually have relatively low costs, but they may also affect how much tax you have to pay. If you borrow from a retirement account and don’t repay on time, there can be significant tax penalties from state and federal taxing authorities. Similarly, you can re-finance your home mortgage or take out a home equity loan or line of credit. Here again, these loans tend to have relatively lower costs, but there can be serious consequences if you don’t repay them on time. You could also borrow from a bank or other lender, taking a personal loan or a cash advance from a credit card. These loans are usually more costly than loans based on your own assets, and they can involve high interest rates and other lending.