What a Financer Looks for in a Prospective Client
Understanding what a litigation financer looks for can be incredibly helpful in determining whether or not you should seek funding. Aside from the likelihood of victory, litigation financers consider a number of other merits. Litigation financers will look at the amount in controversy, the mindset of the claimholder, the quality of the claimholder’s counsel, and the overall timetable. Each of these merits all lead up to the ultimate determination of whether or not a litigation financer is likely to make a return on their investment.
Where most opportunities for receiving financing break down is when the amount in controversy is too low. To begin with, the claim for damages needs to be large, after all, the financer must see a return! Typically, the rule of thumb is a 10:1 ratio. Using this ratio, the “hard” damages are 10 times the amount of the financer’s investment. Additionally, the best kind of damages are out-of-pocket damages (objective amount), opposed to consequential damages (subjective amount).
Next, litigation financers will also look to evaluate the mindset of the claimholder. Overall, they want claimholders to have reasonable expectations about the final outcome of the case. Additionally, the reasonable expectation of the final outcome of the case must be line with the financer’s own view. This is important because the claimholder is the driving force behind the lawsuit. No financer wants to be placed in a position where their investment is not in reasonable hands.
Litigation financers also prefer to finance cases that have quality counsel. However, this is not always a requirement. For example, in situations where the claimholder’s case has fantastic merits and they have not yet gotten counsel, the financer might still fund the case. The caveat is that the financer may make sure that the claimholder will be using quality representation through giving some recommendations. Quite often, a litigation financer will shy away from a case where they truly do not believe that the counsel is of a certain quality.
Lastly, time is money. Litigation financers want to see a return on their investment as soon as possible. To do this, they will look at what stage the case is at. The further along the case is, the quicker they are likely to see a return on their investment. However, this alone is not enough to deter a potential financer from financing a client’s case .
Keywords: litigation funder, mindset, quality counsel, return, damages, timetable
Work Cited: David Lat, How Can You Access Litigation Funding? A Primer, Above the Law (March 22, 2019)
