Litigation Finance Brings Hope to Those Hurt by COVID-19 Fallout

COVID-19 does more than sicken people. It’s brought with it a recession that may take years to mitigate. Businesses across the board are enduring hiring and wage freezes, furloughs, layoffs, and even outright closures. Even the legal community is not safe from the financial ravages of the pandemic.

Bloomberg Law details how Litigation Finance can actually help prop up the legal industry, allowing it to do what it’s meant to do—increase access to justice for ordinary citizens. The challenges of remote working, court delays, and lack of liquid capital are already taking a toll on law firms.

It is not an understatement to claim that Litigation Finance can keep the legal field afloat. Investing in meritorious cases can help small firms stay afloat, and lets larger firms take on more cases that may take longer to resolve. Short term funding that is case or portfolio-specific helps free up working capital for firms until cases are resolved.

Consider Heller Ehrman, a firm that employed over 700 attorneys, closed after the 2008 bankruptcy of Lehman Brothers left them without working capital. A shame, and one that could have been mitigated by third-party funding at the right time.

While it may seem reasonable for more established firms to take out standard bank loans, this is unlikely to happen on a large scale. Banks are often reticent to lend in the midst of a recession. Compiled with ongoing court delays and a dearth of in-person meetings—it’s a recipe for stress and financial instability. As with the financial unrest of 2001 and 2008, it will be far more difficult than usual to secure a bank loan.

With all that in mind, lit fin is an ideal way for firms to free up capital and relieve financial pressure. The non-recourse nature of third-party funding makes it an excellent choice for firms and cash-strapped clients alike.