Transaction Type Matters in Litigation Financing Deals

While repayment may not be top of mind when you are negotiating a litigation financing deal, it should be. How you structure your repayment is one of, if not the most, important factors in a financing deal.

At a high level there are two basic types of payment plans. The first type involves multiple periodic payments that allow you to chip away at the balance due and acts just like a mortgage, or auto loan with the payment being applied partially to interest and principal. These types of litigation finance transaction typically require you to leverage your entire portfolio of cases and have many covenants and restrictions.  The second option typically involves an assignment of a legal fee and requires a single payment when you collect a specified legal fee.  In contrast, assignment and sale transactions have fewer covenants and restrictions and enable you to use your unassigned legal fees, or income to pay for your expenses.

On the surface both options may seem attractive depending on your cash flow and expenses. However, they aren’t and if you select the wrong approach you could end up paying tens of thousands of dollars in interest costs, if not more, while waiting to collect that big legal fee.

At RD, our clients make a single payment once they have collected their legal feels. Our deals are based on the anticipation of people collecting a fee at a given point in time. There are no quarterly interest payments, no ongoing monthly payments needed like with the deals competitors offer.  We assume the risk of delays and time and we get paid when you do.

Having been in the legal field, we understand the challenges of recurring payments. Cash flows are tight and delays in mass tort and other large settlement cases are extremely common. The last thing an attorney or firm needs to worry about is overextending themselves financially because of compounding interest and loan payments where distributions have been delayed.

That experience and approach matters when it comes to complex litigation financing deals. Reach out, we can explain how a single sum repayment benefits the borrower and lender and figure out what is right for your firm. Get In Touch

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