Third-party funding is for everyone

I am often asked what
type of case lends itself to funding, and many lawyers are surprised by the answer, which is that there are very
few cases that do not lend themselves to funding if it makes commercial sense.

The surprise is understandable, as litigation funders have tended to focus on big-ticket cases, usually with an investment
of several million pounds. Understandably, this has
put some solicitors off even considering this as an option
for their clients.

But it is time to think again about how funding can be used for your firm and its clients.
The market is changing, and funding is moving into the mainstream, with some funders willing to invest as little as £10,000 in a case.

Of course, the usual rules apply – for instance, there
needs to be a defendant with
the means to pay. It also can’t
be a punt: there needs to be a reasonable chance of success.

For a growing number of lawyers, litigation funding is proving to be a sensible way
of underwriting revenue and facilitating business growth.
At the same time, funding is moving beyond being a solution just for those claimants with insufficient funds to run their claim. There is a growing wave
of savvy businesses and lawyers proactively using funding as
part of their business growth strategy.

For clients, it makes absolute commercial sense to pursue
a claim when the amount
they could stand to recover outweighs the costs of doing
so. The lawyers we work with recognise this and are proactively changing their clients’ mind-sets and encouraging their clients to view their claim as a valuable business asset.

By introducing financing to all their clients, lawyers are giving their clients more options and generating new work, as well
as retaining matters that would otherwise have disappeared
out the door. In this age of deregulation and increasing competition from unlikely quarters, lawyers can’t afford
to leave anything to chance.

In particular, the impact of funding on cash flow can be significant for firms. Funders have the ability to ensure that your fees are available to draw down at the start of the case, meaning that you can get to work straight away with the certainty that your fees are
ready to draw down as you progress.

It goes without saying
that funders should be
well capitalised. But, just
as importantly, they should
have a rigorous due diligence process, a sound knowledge
of litigation law and excellent financial modelling skills.
The last item is critical, as by knowing where the actual and future costs lie in a matter, both the client and the lawyer can better develop the strategy
for engineering a successful outcome.

At the end of the day, removing the financial obstacle to pursing litigation is a sensible, strategic move for clients and lawyers alike. With the ability
to offer credible financing solutions for cases that were once considered too small for funders, it is easier for solicitors to fulfil their duty to their
clients to present them with
all the options. SJ

Louis Young is managing director of Augusta Ventures