Alternative litigation funding gives businesses and law firms the capital they need to pursue legal action without covering the upfront costs themselves. In exchange for a share of any future recovery, third-party funders cover litigation expenses, transforming how companies approach legal strategy.
What was once seen as a last-resort option is now a mainstream tool for reducing legal risk, preserving working capital, and leveling the playing field in high-stakes disputes. Today, alternative litigation financing in the United States is helping businesses of all sizes treat legal claims not just as costs but as assets worth investing in.
Key Takeaways
- Alternative litigation financing provides capital for legal expenses in exchange for a share of potential recoveries.
- It includes single-case funding, portfolio arrangements, law firm credit lines, and claim monetization.
- Key benefits: risk transfer, balance sheet protection, access to premium legal support, and stronger case development.
- The funding process involves initial case screening, documentation, due diligence, negotiation, and agreement signing.
- Approvals can take a few weeks to 3 months, depending on case complexity and funding amount requested.
FAQs
Who provides alternative litigation funding?
This type of funding is offered by specialized litigation finance companies, private equity firms, hedge funds, and institutional investors.
How much do alternative litigation funders charge?
Charges vary, but funders typically receive 15% to 40% of the recovered amount, depending on the risk and length of the case.
Is alternative litigation funding available for all case types?
No. It’s generally available for commercial disputes, antitrust claims, intellectual property cases, and mass torts, not minor or personal cases.
What Exactly Is Alternative Litigation Funding?
Alternative litigation funding is a financial arrangement in which a third party pays the legal expenses of a case in exchange for a percentage of the outcome. You get funding to cover attorney fees, court costs, expert witness fees, and more without taking on debt or using your own capital.
This financing model exists outside traditional fee structures. The funder assumes the financial risk, and you repay only if your case wins or settles. That turns legal action into a strategic investment, not just a cost center, and helps you take on stronger opponents without compromising cash flow.
The Main Types of Alternative Litigation Funding
Alternative litigation funding isn’t one-size-fits-all. Different funding models can offer more flexibility, risk management, or cash flow support depending on your case profile, legal strategy, or firm structure.
Single-Case Litigation Funding
This is the most straightforward model. A funder invests in a specific legal matter, covering costs such as attorney fees, expert witnesses, or discovery. If the case settles or wins, the funder takes an agreed share of the recovery. If the case loses, you owe nothing. This structure is ideal for businesses with one major dispute but limited resources to pursue it.
Portfolio-Based Litigation Finance
Instead of funding one case, the funder supports a group of cases, usually managed by the same law firm or company. This model can lead to lower pricing, higher funding amounts, and more flexible terms by spreading risk across multiple matters. It’s a strong fit for law firms or businesses with ongoing or repeat litigation.
Law Firm Credit Facilities
Some funders offer law firms access to capital based on the expected value of their contingency fee portfolio. These credit lines or loans are secured against future case outcomes, giving firms more working capital to grow, take on new cases, or manage overhead, without selling equity or increasing long-term debt.
Claim Monetization Solutions
This option lets you convert part of a pending claim into immediate cash, even before litigation begins. It’s helpful when your business needs liquidity to operate, pay legal teams, or pursue related legal strategies while a large case is still pending resolution.
Strategic Benefits of Alternative Litigation Funding
When used strategically, alternative litigation financing covers more than just legal fees; it can reshape how you approach risk, budgeting, and legal leverage.
Transfer Risk Without Adding Debt
You don’t repay the funder with non-recourse funding unless the case wins or settles. That means no new debt, interest payments, or downside if the case fails. The financial risk shifts entirely to the funder.
Keep Legal Costs Off the Balance Sheet
Litigation funding is typically structured as a non-debt, off-balance-sheet solution. That improves your financial ratios, preserves working capital, and keeps your legal costs from affecting your company’s credit profile or borrowing capacity.
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Funding makes hiring top-tier lawyers, expert witnesses, and litigation support easier, even if you couldn’t afford them upfront. That can improve your case strategy and give you an edge against well-funded opponents.
Improve Case Strength and Settlement Leverage
Well-funded cases tend to be better documented and strategically developed. Funders perform their own due diligence, which can validate your claim. The result: more confidence in your case and stronger positioning in settlement negotiations.
How the Alternative Litigation Funding Application Process Works
Getting funding typically follows a structured, five-step process. Here's what to expect:
1. Initial Case Assessment
The funder conducts a quick review to determine if your case meets basic eligibility criteria (case type, jurisdiction, legal team, potential recovery).
2. Submit Documentation
You and your attorney provide core documents: pleadings, case timeline, estimated damages, budgets, and supporting evidence.
3. Full Due Diligence
The funder’s legal and financial teams dig into the case. They review liability, potential defenses, recovery prospects, and cost projections. This step can take a few weeks to complete.
4. Negotiate Terms
If the case passes due diligence, you’ll negotiate the key terms: funding amount, repayment share, time horizon, and any decision-making rights or restrictions.
5. Final Agreement and Disbursement
Once you sign the agreement, funds are disbursed. Ethical and confidentiality safeguards are built into the contract to protect all parties involved.
Conclusion
Alternative litigation funding has become a strategic financial tool, not just a fallback option. It allows businesses and law firms to pursue strong legal claims without draining internal resources, while shifting financial risk to a third party.
Whether you need support for a single dispute, ongoing case portfolios, or firm-level growth, litigation finance can offer flexible, non-dilutive capital aligned with your success.
If you're evaluating a high-stakes commercial dispute, it may be time to consider whether alternative litigation funding aligns with your legal goals and financial strategy. Be sure to consult with your attorney and financial team to assess case suitability and find the right funding partner.
