Legal funding is money a company lends you based on your pending lawsuit, not your credit or income
Legal funding (also called litigation funding or a lawsuit loan) is a cash advance against the money you expect to receive when your case settles or a court awards a judgment. The lender bets that you will win and get paid; if you lose, you typically owe nothing back. The company makes its money by taking a percentage of your settlement or judgment—usually 25 to 50 percent of what you receive, though the exact cut depends on how long your case takes and which company funds it.
Unlike a traditional loan, legal funding does not require you to have good credit, a steady job, or collateral. The only thing that matters to the lender is whether your case has real value. You do not make monthly payments while you wait for your case to close. Instead, the lender waits and takes their cut from the final payout. If your case is dismissed or you lose at trial, you walk away without owing the company anything.
The money arrives as a lump sum, usually within one to three weeks of approval. You can use it for rent, medical bills, living expenses, or anything else while your lawsuit is pending. Many people use legal funding to avoid settling their case too early for less money than it is worth, because they no longer have to choose between paying bills now and waiting for a bigger payout later.
Key Takeaways
- Legal funding is a cash advance against your expected settlement or judgment, not a loan you repay with monthly payments.
- The funder takes a percentage of your final payout (typically 25 to 50 percent) instead of charging interest or requiring credit approval.
- You owe nothing if your case is dismissed or you lose, because the funder's profit depends entirely on your case succeeding.
- The money usually arrives within one to three weeks and can be used for any expense while you wait for your case to close.
- Legal funding is most common in personal injury, medical malpractice, and employment cases where the settlement amount is predictable.
How the cost of legal funding is calculated
Legal funding companies do not charge interest the way a bank does. Instead, they take a percentage of your settlement or judgment. That percentage varies based on two main factors: how long your case takes and how risky the funder thinks it is.
A case that settles in six months might cost you 25 to 30 percent of the payout. A case that goes to trial and takes two or three years might cost 40 to 50 percent. The longer the funder has to wait, the larger their cut, because they are tying up capital and taking on more risk that something could go wrong. Some companies also charge a small monthly fee (usually $50 to $200) on top of the percentage, though this is less common and should be stated clearly in your contract before you sign.
The funder does not take their cut from your attorney's fees. If your lawyer is working on contingency (meaning they also take a percentage of the settlement), both the funder and your attorney take their cuts from the gross settlement amount. This means you need to understand the math: if you receive a $100,000 settlement, your attorney takes 33 percent ($33,000), the funder takes 30 percent ($30,000), and you receive $37,000. Always ask the funder for a written breakdown of their exact cost before you accept the money.
What types of cases may have access to for legal funding
Legal funding companies focus on cases where the settlement amount is reasonably predictable and the case has a clear path to resolution. Personal injury cases are the most common—car accidents, slip-and-fall injuries, workplace accidents, and dog bites. Medical malpractice cases also may have access to frequently, as do employment disputes (wrongful termination, discrimination, wage theft).
Some companies will fund product liability cases, class actions, or premises liability claims. A few specialize in specific areas like sexual abuse settlements or nursing home negligence. What they all have in common is that the liability is usually clear (the defendant is obviously at fault) and the damages are measurable (medical bills, lost wages, pain and suffering).
Cases that are harder to fund include criminal defense (because there is no money to recover), divorce cases (because the outcome is unpredictable), and cases where liability is genuinely in dispute. If your case is unusual or your attorney is not sure whether a funder will take it, ask your lawyer to contact a few companies directly—they make quick decisions and will tell you yes or no within days.
The approval process and timeline
Approval for legal funding is fast compared to traditional lending, but it still requires your attorney's involvement. You cannot explore on your own; the funder needs to speak directly with your lawyer about the case details, the strength of liability, the estimated settlement range, and how long the case is likely to take.
The process usually works like this: you contact a legal funding company and provide basic information about your case. The company asks for your attorney's contact information and reaches out to them directly. Your attorney provides a case summary, medical records or evidence, and their assessment of the settlement value. The funder reviews this material and makes a decision, usually within three to five business days. If approved, you sign a contract, and the money is wired to your attorney's trust account or to you directly within one to three weeks.
The entire timeline from first contact to cash in hand is typically two to four weeks. Some companies are faster; others take longer depending on how complex your case is. If your attorney is slow to respond to the funder's requests, the timeline stretches. Make sure your lawyer knows you are seeking legal funding and ask them to prioritize the funder's questions.
What happens to your settlement when the case closes
When your case settles or you win a judgment, the money goes to your attorney's trust account first. Your attorney then pays out three groups in this order: court costs and filing fees, the legal funding company's cut, and your attorney's fees. Whatever is left goes to you. The funder does not take their money directly from the defendant or the insurance company; they take it from your settlement check after it arrives at your lawyer's office.
Your attorney is responsible for making sure the funder gets paid. Most attorneys are familiar with this process and handle it automatically. However, you should confirm with your lawyer that they understand the funder's contract terms and know exactly how much to pay out. If there is any confusion, the funder and your attorney will communicate directly to sort it out before you receive your portion.
If your case is dismissed or you lose at trial, the funder receives nothing and you owe them nothing. This is the key difference between legal funding and a traditional loan. The funder's entire profit depends on your case succeeding, which is why they are selective about which cases they fund and why they review your case carefully before approving the money.
Risks and downsides of legal funding
The main risk is that legal funding reduces the amount of money you take home from your settlement. If you receive $100,000 and the funder takes 40 percent, you lose $40,000 that could have been yours. This is why it is important to understand the full cost before you accept the money and to shop around—different companies charge different percentages, and negotiating the rate can save you thousands of dollars.
A second risk is that legal funding can create pressure to settle quickly. If you have already received cash from a funder, you may feel tempted to accept a settlement offer sooner than you otherwise would, just to close the case and stop paying the funder's percentage. This can work against you if a larger settlement was possible with more time. Discuss this risk with your attorney before taking legal funding and agree on a settlement strategy together.
Legal funding also adds complexity to your case. Your attorney has to manage the funder's contract, keep them updated on case progress, and coordinate the payout. If your attorney is disorganized or the funder is aggressive, this can create friction. Make sure your attorney has experience with legal funding and is comfortable managing it before you move forward.
Legal funding versus other ways to pay for a lawsuit
Legal funding is one option, but it is not the only way to cover expenses while your case is pending. Your attorney may work on contingency, meaning they take no upfront fee and only get paid if you win—this is standard in personal injury cases. Some attorneys offer payment plans or reduced fees for clients in financial hardship. You might also borrow money from family, use a personal line of credit, or tap savings.
The advantage of legal funding over these alternatives is that you do not have to repay it if you lose your case, and you do not have to make monthly payments while you wait. The disadvantage is the cost—a 40 percent cut of your settlement is steep compared to a personal loan at 10 percent interest. If you can cover your expenses another way, that is usually cheaper. Legal funding makes sense when you have no other option and you need cash now to avoid settling your case too early.
Some people combine legal funding with other strategies. For example, you might take a small legal funding advance to cover when ready bills, then use a payment plan or family loan for other expenses. Talk to your attorney about what combination makes sense for your situation and your case timeline.
Frequently Asked Questions
Can I get legal funding if my attorney is not interested in my case?
No. Legal funding companies will not fund a case without an attorney's involvement, and they will not fund a case your attorney thinks is weak. If your attorney has declined to represent you, you will need to find a different attorney first. Some attorneys specialize in cases others have rejected, so it is worth asking around.
What if I settle my case for less than the funder expected?
The funder takes their percentage of whatever you actually receive, not what they predicted. If they expected a $100,000 settlement and you settle for $50,000, they take their cut of $50,000. This is why it is important to be honest with the funder about your case from the start and to update them if circumstances change.
Do I have to disclose legal funding to the other side in my lawsuit?
This varies by state and by the type of case. In some states, you must disclose it; in others, you do not. Your attorney will know the rules in your jurisdiction and will advise you. Do not hide legal funding if your state requires disclosure—doing so can damage your credibility or even result in sanctions from the court.
Can I get legal funding if I am already receiving workers' compensation or disability benefits?
Yes, but the funder will want to understand how the benefits interact with your lawsuit. If you are suing a third party (not your employer) while receiving workers' compensation, legal funding is usually straightforward. If your case involves Social Security Disability or other government benefits, the funder may require that some of your settlement be used to repay those programs. Discuss this with both your attorney and the funder before accepting money.
What happens if my attorney and the funder disagree about the settlement amount?
This is rare, but if it happens, your attorney's judgment controls. Your attorney is your representative and has a duty to act in your best interest. The funder can only take their cut from the actual settlement; they cannot force your attorney to reject an offer or hold out for more money. If there is a serious disagreement, your attorney and the funder will work it out directly.