The Commercial Litigation Finance is a non-recourse investment in commercial disputes. Commercial litigation finance is also known as lawsuit or prosecution funding or legal financing. The litigation funder invests in the lawsuit action and if the business or individual wins the case. Then litigation funders take the return of their investments with a portion of monetary recovery.
Generally, commercial litigation finance returns are structured as a multiple of the original investment or some percentage of the total monetary recovery. If the case does not come in favor then the receiver of the litigation funds owes the lender/funder nothing.
There are multiple types of commercial litigation finance:
- Single-case financing:- in single case financing generally the funder provides the capital to support a single arbitration.
- Portfolio financing:- in portfolio litigation financing, funders typically diversify the funds between several cases to minimize the risk of losing. In this type of case, funders can fund both sides.
- Multi-party funding:- in Multi-party funding the borrower, is a group claims financing or class auction.
Finance in commercial litigation finance is a non-resource funding. It is not a loan which means there is no obligation to repay the amount. The return is highly risky with no guarantee. THe best way to manage this Litigation Finance is to diversify the funding by creating portfolio.
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