In this article, we’ll talk about Fenchurch Legal Litigation Finance to see what works and what doesn’t. But what is litigation funding? Is it something you should invest in?
In litigation financing, a group of investors pool their resources to cover the cost of legal counsel. Litigation investors are financial backers who chip in toward a plaintiff’s legal fees, making it possible for them to file a case that would otherwise be out of reach.
Litigation funding, often known as litigation finance, is a relatively new but rapidly growing alternative asset class.
This is because to the high returns it can generate and the fact that it does not follow the same patterns as other investing assets or techniques. Historically, only large financial entities such as endowments, foundations, family offices, private equity firms, and hedge funds had access to the chance to invest in lawsuit matters.
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How does litigation funding work?
By covering some or all of the fees, you can invest in a share of the financial return if a case is won. In addition to receiving your initial investment back, you may receive a percentage of the recovered money or a multiple of it after the litigation.
As the possible payoff for a win is very sensitive to the specifics of the payout scheme, the stakes are enormous if the latter is successful. It’s hardly risk-free to aim for such rewards, though.
Your investment in a lawsuit will provide no returns if the case is dismissed. Payment in litigation financing is made entirely on the basis of success, without regard to the borrower’s ability to repay the loan. Making money as a litigation investor is contingent on a successful settlement or recovery. You could invest in litigation financing if you’re willing to take the risk.
Litigation finance can support lawsuits in many fields, however litigation investors are particularly interested in certain types of cases.
Class Action and Corporate Lawsuits
Commonly, litigation financing is utilized to pay for class action lawsuits which could promote the use of such investment as a tool for social change.
The next, far less interesting category is that of patent litigation and corporate financing. Litigation investors can find a lot of success in the business world because many organizations are regularly involved in various legal challenges at the same time.
Lawsuits brought against corporations often follow predictable and common trends. Though it might deplete resources and tie up a company’s money. Thus, many such companies use typical litigation financiers, who fund and accept legal risks. If the case doesn’t go the company’s way, the loss is mitigated.
Conversely, if the corporation wins, it celebrates and earns from assets not locked up in legal fees. For similar reasons, litigation finance has become a very popular means of funding patent disputes.
The benefits of lawsuit investors are not limited to businesses. Although patent infringement proceedings frequently result in monetary awards, pursuing an offender can be expensive.
Who is Fenchurch Legal?
London-based Fenchurch Legal supports UK small and medium-sized law firms. Their strategy is loaning the claimant money up front to pay for his or her legal fees, either whole or in part.
In 2020, Fenchurch Legal was founded to meet the specific needs of solo and small firm attorneys by providing them with affordable and adaptable litigation funding solutions. More than 10,400 cases have been properly funded thanks to the company’s steady but significant development since its establishment.
Customers have found their upfront pricing and easy drawdown models to be very helpful.
Fenchurch Legal’s clear business plan stands out in a litigation funding industry with many options. They have honed in on the niche market of high-volume, low-value after-the-event (ATE) claim funding, giving them an edge over competitors.
Obtaining finance from a typical bank may be difficult for law practices that are involved in lengthy and expensive litigation. Because of this, litigation funding companies like Fenchurch Legal have emerged to help law firms overcome financial obstacles and increase their overall success rates.
The loan terms that Fenchurch Legal provides are normally between 12 and 18 months. Loan terms can be adjusted to fit the client’s needs, with the organization offering loans for anywhere between 6 and 24 months. These loans are arranged so that interest is paid upfront and principal is repaid upon maturity. Fenchurch Legal’s approach to lending is case-by-case, with a strict emphasis on matters that are fully covered by ATE insurance.
Fenchurch Legal takes a fixed charge and assignment over the case and any associated insurance proceeds as collateral for all funding arrangements.
When compared to the typical court system, the ATE market operates in a very different way. If the agreed costs and disbursements are covered by an ATE insurance policy, then those amounts are still recoverable in the event of a case loss. In the event that a case does not succeed, Fenchurch Legal will be reimbursed in full by the ATE insurance policy, making this a unique selling point.
What does Fenchurch Legal litigation finance cover?
Coverage under ATE insurance policies extends to a wide range of legal disputes, including:
- Property Deterioration
- Improper Financial Product Sales
- Security Deposit
- Personal Contract Payments
- Operational Disruption
Fenchurch Legal Products
Expenses incurred by attorneys on their clients’ behalf can be covered by this financing option. Expert witness fees, filing costs, and the cost of an ATE insurance policy are all covered by a disbursement loan.
Many plaintiffs who would be prevented from seeking redress are able to do so thanks to a funding option because they are not required to front any money themselves.
Because of the availability of disbursement funds, law firms can expand their client roster and revenue stream.
If you have a smaller, high-volume legal battle, the disbursement funding may be a good fit for you.
Expert witness reports and other materials crucial to a case’s success might be sponsored with the help of disbursement money.
- Affordable rates and flexible payment plans.
- Withdrawing money is quick and easy.
- Spending is made conditional on having an ATE policy.
- The client’s payment is sent directly to your law firm.
- Loans will be repaid once the court action is over.
- Results in an enhanced cash flow situation as repayments are covered by a comprehensive ATE Insurance policy, even in the event of case failure.
- Clients are relieved from the obligation of upfront expenses.
- Ensures the continuous progression of cases, allowing for a smoother workflow.
- The capacity to handle a higher caseload is expanded without being encumbered by cash flow constraints.
Work in Progress (WIP) funding is a vital up-front resource that pays for both WIP and associated disbursements in each individual instance. This product is a complement to Fenchurch Legal’s Disbursement Funding product that can help meet some of your ongoing business expenses while the case is pending.
Since law firms don’t get paid until a lawsuit settles, cash flow problems are a common problem for these businesses when their resources are depleted during the course of a case.
Upfront assistance from Fenchurch Legal helps manage minor disputes and expansion.
- Flexible agreements with clear price structures.
- Transferring money quickly and without any problems.
- If covered by the ATE policy, funding is available for litigation support costs.
- Payback of the loan upon case resolution.
- Frees up capital for regular use and increasing your company’s bottom line.
- Increases in one’s firm’s cash flow, which can be used to pay for the routine costs that arise in running a law business.
- Facilitates business expansion.
- Adds resources to deal with a growing caseload.
Fenchurch Legal offers two pricing tiers for its loans:
Fixed Non-Refundable Rate
This tariff applies a fixed interest at the start of the loan term. This interest is constant throughout the loan period, regardless of settlement. Importantly, no interest is reimbursed if the case ends before the loan’s maturity date. This option, in essence, guarantees a steady interest payment no matter the length of the litigation or the outcome.
Fixed Refundable Rate
The interest rate for the entire loan period is established at the outset. If the case is resolved before the loan term finishes, the borrower receives any unpaid interest, unlike the non-refundable rate. This option gives debtors a little more leeway in the event that their cases resolve sooner than planned, by providing a rebate on unpaid interest.
What are the pros and cons of litigation financing investments?
- Due to the lack of correlation between litigation finance and more traditional financial markets, it can be used to diversify a portfolio.
- Investment returns from winning disputes in court can be enormous, frequently outstripping those of more conventional financial instruments.
- In the absence of litigation funding, parties with limited financial resources would be precluded from accessing the legal system and pursuing legitimate claims.
- Litigation funding can lessen the burden of pursuing a case financially for plaintiffs. They will owe the funder nothing if they are unsuccessful in their legal battle.
- In order to maximize the possibility of investing in excellent cases, reputable litigation funders do extensive due investigation before making any investments.
- Litigation financing is open to investors regardless of their familiarity with the law. Professional fund managers evaluate, strategize, and manage cases.
Even in seemingly solid instances, there is always the chance of an unexpected outcome that could result in a loss of funds.
- Legal fees can quickly add up in a litigation case, eating away at any profits that might otherwise have been made.
- Profiting from the legal problems of others raises ethical concerns for some investors and lawyers.
- The failure of even one case can significantly affect the value of a litigation financing investment portfolio.
- Litigation financing operates in a legally murky and frequently shifting regulatory landscape. There may be inconsistencies in the rules depending on where you go.
- Investors often have little say in the strategy and judgments of the legal team representing them.
- The success of a case and, by extension, the profits on an investment, can be affected by shifts in the legislation, rules, or legal precedents.
- Once money has been invested, getting out before the lawsuit is over might be difficult.
- It may be difficult to recoup the investment if the party seeking funding lacks the financial wherewithal to cover losses.
- Due to the unpredictability of legal actions, placing a value on investments in litigation finance can be more difficult than doing so with more conventional assets.
Overall this is a higher-risk investment.
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