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Legal funding includes plaintiff, defendant, law firm, legal aid, and private financing. Legal aid is public or non-profit money for low-income individuals. Private financing is available through loan companies for parties awaiting settlement or to file a lawsuit. Legal financing can provide access to courts for those who cannot afford it. Private financing groups provide financial support for legal action. Litigation funding comes in the form of a cash advance for legal and attorney fees. Law firms can also apply for legal financing. Legal financing can help businesses expand and acquire more clients.
There are many different types of legal funding — plaintiff funding, defendant funding, and even law firm funding, depending on your circumstances. One of the best-known types of legal funding is legal aid funding, which is public or non-profit money dedicated to helping poor people defend their rights in court. Private legal financing is also available through loan companies for parties awaiting settlement or for individuals who wish to file a lawsuit but lack the capital up front. Some legal funding is for attorneys, especially those working in fee-based contracted practices who may need the money to cover operating expenses while awaiting court decisions and payment.
Lawsuits are usually very expensive businesses. Hiring lawyers can be quite expensive, and even just filing a case is rarely cheap. Parties can wait months or even years for final settlements or judgments. Legal funding can provide flexibility and access to the courts for people who might not otherwise be able to afford it.
In the nonprofit sector, public funding for legal aid can help low-income individuals bring or defend lawsuits. Legal aid clinics are prevalent in many communities and offer legal advice and representation to certain clients. Funding for these operations often comes from tax dollars and charitable donations.
Private cause funding organizations typically work a little differently. While a legal aid group will advise and ultimately represent clients for free or a reduced fee, private financing groups function more like loan agents. They provide financial support for a legal action, but are not themselves involved in how that action is brought or defended.
Litigation funding for individuals and businesses usually comes in the form of a cash advance. Individuals involved in pending lawsuits can apply for legal financing through these lenders when it looks like they will get a deal, but that deal is not likely to materialize for some time. This type of funding is usually designed to help people continue to pay legal and attorney fees while awaiting a final ruling. Most of the time, these services are designed for plaintiff funding, but sometimes they can be used by defendants as well. Much depends on how likely the party is to recover enough money to make the initial financing investment worthwhile to the lender.
Some law firms also apply for legal financing from private lenders. Attorney funding is most common in the plaintiff’s rights industry. In many places, it is common practice for plaintiffs’ attorneys to get clients by promising emergency services. This means that the lawyers will not be paid until the court issues a final settlement. Such an arrangement is usually beneficial to plaintiffs, but can be financially burdensome for businesses.
Until a business is well established with a large amount of capital, it may find it difficult to pay all its bills and keep staff employed waiting to be paid. Legal funding can help companies in this type of situation to expand their business and acquire more clients at a time. The terms and rates of law firm legal financing are generally very different from private litigation financing. For this reason, legal financing initiatives typically focus on only one type of client.
