The Benefits of Litigation Funding for Law Firms

Litigation funding, also known as litigation finance, has become an increasingly popular solution for law firms seeking financial support to manage their caseloads. A recent report from Burford found that 82% of law firm lawyers now report having used legal finance, compared to just 9% in 2012 – a ninefold increase!

While litigation funding is often associated with funding multi-million-pound lawsuits, it is equally valuable for supporting smaller consumer claims.

In this article, we look at litigation funding in the smaller consumer claims market and highlight the benefits for law firms managing high-volume, low-value claims, such as housing disrepair and financial mis-selling.

Understanding Litigation Finance for Small Consumer Claims

Litigation finance varies significantly between large-scale cases and small consumer claims. In large cases, funders provide capital to a law firm or business to cover the costs of litigation in exchange for a portion of the winnings if the case succeeds. This is usually done on a non-recourse basis, meaning the funder assumes the financial risk and only receives a return if the case is won.

In contrast, litigation funding for small consumer claims operates differently. It is similar to a loan structure, where the funder provides capital to cover specific disbursements involved in running the case. These disbursements include the cost of expert reports, case acquisition fees and After-the-Event (ATE) insurance.  ATE insurance is a key component, as it mitigates the financial risk of unsuccessful cases, ensuring the funder recoups their loan while protecting the law firm and claimant from liability.

This model addresses a key challenge for law firms handling a high volume of claims. While the costs for one individual case may seem manageable, when a law firm is managing hundreds or even thousands of cases, the total financial burden can be overwhelming.

Benefits of Litigation Funding for Law Firms

1

Financial Risk Mitigation

Partnering with a specialist litigation funder like Fenchurch Legal allows law firms to reduce the financial risk exposure of funding disbursements and other case-related costs from their own balance sheets.
2

Cash Flow Stability

Litigation funding ensures that law firms can maintain a stable cash flow by ensuring their capital is not tied up in a high volume of ongoing cases. With external funding, law firms have greater financial predictability through structured funding and repayment schedules and can allocate resources more effectively.
3

Tailored Funding Solutions

Law firms benefit from funding solutions specifically designed to support their business model. Unlike traditional bank loans, which have rigid terms and lengthy approval processes, specialist litigation funders offer tailored facilities with faster turnaround times. These solutions align with the unique demands of managing high-volume claims.
4

Enhanced Case Capacity

With litigation funding, law firms can take on more cases, particularly those with strong prospects of success. Without the financial strain of upfront costs, law firms can expand their caseload, boosting their revenue potential while improving overall case outcomes through more effective resource allocation.
5

Supporting Law Firm growth

Litigation funding provides law firms with the flexibility to focus on growth. By freeing up capital that would otherwise be tied up in running claims, law firms can reinvest in their operations, marketing, and infrastructure to help attract new clients.
6

Access to Justice

Litigation funding plays an important role in facilitating access to justice and allows law firms to support clients who cannot afford legal fees. It ensures that even low-value claims, such as housing disrepair, receive the financial backing needed to proceed. Additionally, it helps to level the playing field, allowing law firms to challenge well-funded defendants such as large corporations.
7

Competitive Edge

Using litigation funding helps law firms gain an advantage in a competitive market. By offering funding-backed solutions, they can differentiate themselves and attract clients who might be deterred by the financial burden of pursuing a legal claim.

Litigation funding is a game-changer for law firms managing small consumer claims. It offers flexibility, reduced financial risk and the ability to take on more meritorious cases with confidence. By removing the financial burden of upfront costs, law firms can focus on growth, client satisfaction, and achieving better outcomes.

If you would like to explore funding solutions with Fenchurch Legal, contact us today to learn more about our tailored funding solutions designed to help your law firm succeed.

Litigation Funding: A Beginner’s Guide for Investors (2025)

In this beginner's guide, we'll explore the basics of litigation disbursement funding for the small claims market and the opportunity for investors to enter this growing market.

Read More