There are many terms commonly used in the legal funding industry and are important for plaintiffs to understand when entering into funding agreements. This week we’re taking a look at non-recourse and how it works in the legal funding process.
In legal funding, “non-recourse” refers to a type of funding arrangement where the plaintiff is not personally liable to repay the funding advance if the case is unsuccessful or does not result in a settlement or verdict. Instead, repayment of the advance is contingent upon the successful outcome of the case.
Non-recourse funding is a common type of legal funding arrangement and is often used in personal injury cases and other civil litigation where plaintiffs may face financial hardships while pursuing their claims.
Let’s take a look at how it works.
No Personal Liability
In a non-recourse funding agreement, the plaintiff is not personally responsible for repaying the funding advance. If the case is lost or does not result in a settlement, the plaintiff does not owe anything to the funding company.
Repayment from Case Proceeds
Instead of the plaintiff repaying the advance out of their own pocket, the funding company is repaid directly from any settlement or verdict proceeds obtained as a result of the lawsuit. This repayment typically includes the amount of the advance plus any agreed-upon fees or interest.
Risk for the Funding Company
Non-recourse funding places the risk of the case outcome primarily on the funding company. If the case is unsuccessful, the funding company absorbs the loss of the advance and does not recoup its investment.
Advantages for Plaintiffs
Non-recourse funding can be advantageous for plaintiffs who may not have the financial resources to pursue a lawsuit on their own. It allows them to access the funds they need to cover legal expenses without taking on the risk of having to repay the advance if the case is unsuccessful.
Underwriting Process
Because the funding company assumes the risk of repayment, non-recourse funding agreements typically involve a thorough underwriting process to assess the merits and potential outcomes of the case before providing the advance.
Legal Funding From Cash Now Funding Group
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