Why Experience Matters in Litigation Finance Deals
Date:
January 19, 2026
Author:
Roni Dersovitz, Esq.
The litigation funding landscape has undergone a dramatic transformation. What once operated as a niche market has evolved into a sophisticated financial ecosystem worth billions. Yet as capital becomes more selective and underwriting standards tighten, law firms are discovering an uncomfortable truth: access to litigation finance increasingly depends on more than just case merits.
Market data reveals this shift clearly. U.S. commercial litigation finance deal volume sits roughly 30% below its 2022 peak, according to Westfleet Advisors. Bloomberg recently characterized the sector as "having a bad year," noting that available capital is contracting as investors demand more predictable outcomes and reduced risk exposure. The global litigation funding market still projects growth to approximately $37 billion by 2032—reflecting a compound annual growth rate of roughly 10%—but the path forward favors selectivity over volume.
For law firms managing contingency based fees and earned receivables, this creates both challenges and opportunities. Understanding how to navigate this evolving market can mean the difference between accessing strategic capital and being left without funding options when you need them most.
Higher interest rates and tighter capital markets have fundamentally altered litigation funding dynamics. Institutional investors who once pursued growth at any cost now emphasize risk-adjusted returns and timing certainty.
This shift manifests in several concrete ways:
Funders conduct deeper due diligence on case duration and complexity. They scrutinize post-settlement timelines with renewed intensity. Deal structures increasingly emphasize risk-sharing arrangements rather than simple capital deployment. The result is a market where disciplined underwriting and specialized knowledge create competitive advantages that pure capital cannot replicate.
"Experience and judgment matter more than ever as funding becomes more selective," notes Roni Dersovitz, founder of RD Legal Funding. "The ability to assess risk, structure capital efficiently, and navigate cases through resolution is what differentiates durable funding partners from opportunistic capital."
This selectivity particularly impacts smaller law firms and practices focused on contingency work. Traditional lenders rarely recognize legal receivables as viable collateral, leaving many firms scrambling for working capital even when they have substantial earned fees tied up in post-settlement processing.
Eight trends are reshaping the litigation finance landscape:
These developments signal a market moving toward greater sophistication and selectivity, where understanding nuance matters as much as having capital to deploy.
Data analytics and artificial intelligence have revolutionized litigation finance underwriting. Algorithms now analyze historical case outcomes, predict success probabilities, and calculate potential returns with impressive precision. Funders can efficiently score matters based on judge history, opposing counsel records, and projected settlement timelines.
Yet this technological sophistication creates its own challenges. Legal risk remains inherently nuanced and fact-specific. Variables that determine case outcomes often resist quantification. Settlement negotiations turn on human judgment, strategic positioning, and factors that no algorithm can fully capture.
The most effective litigation funding solutions combine data-driven insights with seasoned judgment. Models identify patterns and stress-test assumptions, but experience interprets results within the broader context of litigation dynamics. This combination becomes essential when evaluating complex matters, unusual fee structures, or cases that fall outside standardized templates.
Market consolidation among large funders has inadvertently created space for specialized providers to thrive. Standardized funding products serve certain cases well, but many strong matters require flexible capital and tailored structuring. Post-settlement funding and earned fees financing represent prime examples of areas where specialized expertise delivers superior outcomes.
Law firms with earned receivables face unique challenges. These assets represent real value—fees earned through successful case resolution—but traditional financing sources rarely accommodate them. Converting these receivables into immediate working capital requires understanding both legal practice economics and sophisticated financial structuring.
Specialized legal finance providers bridge this gap by recognizing what traditional lenders miss: a law firm's most valuable assets often lie in their contingency arrangements and pending settlements. By accelerating access to earned fees, these providers enable firms to meet operational obligations, reinvest in active cases, and pursue strategic growth without depleting reserves or taking on restrictive debt.
As the litigation funding market evolves, several factors should guide firm decision-making:
Evaluate provider experience beyond capital size. Large funding pools don't automatically translate to better outcomes. Look for providers who demonstrate deep understanding of legal practice dynamics, post-judgment processing, and the specific challenges your firm faces.
Consider funding structures carefully. Risk-sharing arrangements and hybrid solutions often provide more flexibility than traditional funding models. The right structure aligns incentives while preserving your firm's strategic autonomy.
Plan ahead for capital needs. The market's increased selectivity means securing litigation finance takes longer than in previous years. Waiting until you face immediate cash flow pressure puts you at a negotiating disadvantage.
Focus on relationship-based partnerships. One-off funding arrangements may solve immediate problems, but sustained success requires working with providers who understand your practice and can structure solutions as your needs evolve.
The litigation finance market's maturation ultimately benefits sophisticated consumers. While access may be more selective, the quality of available solutions has improved dramatically. Firms that approach funding strategically—prioritizing experience, structure, and alignment over pure capital availability—position themselves to thrive regardless of market conditions.
About RD Legal Funding
RD Legal Funding provides tailored capital solutions for law firms by accelerating access to post-settlement and earned fees. We understand that managing a successful legal practice requires more than just winning cases—it requires strategic financial planning and reliable capital partnerships.
To learn more about how specialized litigation funding can support your practice, contact us at (800) 565-5177 or info@legalfunding.com.
