Loans vs. Funding: Knowing the difference in terms of Lawsuit Advance Funding

When people think of loans, they think of speaking to a bank representative about their business proposal or their personal problems in order to get financing from the bank. The bank does its due diligence, and after an exhausting and long analysis of the prospective candidate, makes the decision whether or not to lend. If the loan is made by the bank, there is a set payment schedule to pay back the loan with interest. To protect the bank or lending entity, collateral or a co-signer are often required to ensure they receive payment if the loan recipient defaults on his payments. With lawsuit advance funding, there are a few major differences. When a person gets injured physically, mentally, or emotionally and they decide to pursue legal action, a lawsuit funding company can provide financing to both the plaintiff and/or attorney. When a company decides to fund a case, they do so by giving an advance, which is different from a loan. A loan must be paid back. Lawsuit funding advances, on the other hand, are non-recourse transactions that do not have to be paid back unless the case results in a favorable outcome. The funds can be used however the plaintiff sees fit, and there are no restriction as to how they spend it. Lawsuit advance funding is relatively new in the United States. As most people know, lawsuits can be expensive for both sides, but especially for the plaintiff trying to seek justice. A tactic sometimes used by defense teams involves dragging out a case for as long as possible so the plaintiff eventually succumbs to a low settlement. If a plaintiff applies for and receives an advance from a lawsuit funding company, this can tip the scales a little to the plaintiff side in a number of ways. If the plaintiff is hurt or unable to work, that funding can help keep them afloat until a settlement comes through or they win the decision. That sum of money may allow them to maintain their lifestyle or something close to it. This in turn takes some of the pressure off the plaintiff's attorney, as he is less likely to be pressured by the plaintiff to accept an unreasonable settlement.