If you are a personal injury attorney chances are you have already had to face the many challenges that plaintiff funding can create. For those of you who are unfamiliar with clients receiving an advance, plaintiff funding is when a client receives a non-recourse cash advance against their pending lawsuit. These advances help clients through difficult financial times while they wait for their case to settle. As you know, many clients are unable to work after an accident and still need to pay their bills. Plaintiff funding companies can truly help a client in this instance, but when a client receives an advance it can cause challenges between the attorney, client and funding company.

As I mentioned before, when a plaintiff receives funding against their case it is done on a non-recourse basis. That means repayment is contingent upon the successful outcome of the claim. If the plaintiff loses their case or yields an amount insufficient to repay the funder, the funder goes home empty-handed. Because the risk is high to the funder, the cost is commensurately high to the plaintiff. It is important as an attorney to review every agreement to ensure there aren’t any hidden fees and your client is receiving a fair deal. A low rate can be enticing and misleading. Be aware that most advances are on a compounding interest schedule. To protect your client, always request to view the payback schedule before signing an agreement.

For those of you that have had to deal with funding companies in the past, you know that collecting relevant documents and filling out applications is no easy feat. If you have several clients looking for funding at the same time, you or a paralegal could easily spend an entire day compiling all of the case information. I recommend finding a funding company that you can easily refer clients to and that you can build a relationship with. As with any business, the better relationship you have with the funding company the less documentation you will need to provide.

The Challenges of Plaintiff Funding One of the biggest challenges is talking to clients about when or if it is appropriate for them to receive an advance against their case. As the client’s attorney you have an ethical obligation to explain to the client that receiving an advance against their case should be a last resort. It is also important to tactfully explain to the client that their case may not be able to support an advance. If you have a good relationship with the funding company, let them be the bad guy and tell the client that they are unable to provide an advance. The funding company should understand that building a good relationship with you is worth being the bearer of bad news to the client.