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Going to court: What are the available funding options?
Posted on | February 21, 2013 | Comments Off
Taking a case to court could set you back by a fair amount in financial terms. Many court cases can stretch on for months or even years, which is often what causes the costs to soar. If you don’t have the funds at hand to get your day in court, there are funding options out there that could help. The various funding options out there have developed over the years to provide people and companies with the means to win court cases. Some of these methods are not used anymore, but have helped to progress the use of newer options.
Let’s take a look at the funding options through the ages:
1) Consumer Credit Agreements (CCAs)
This is one of the funding options that are no longer used, because of the high risks that can be involved. A person could take out a CCA to fund their court case. They would apply for one through a funding house and they would usually last for around three years. If approved, the person could access the funds to pay for solicitor disbursements and other payments, and they would also take out After the Event (ATE) insurance, which would repay the loan should the court case fail.
If the case was won though, the cost of the CCA and the lawyer’s fees would be repaid from the other side, so the claimant could keep all of the damages awarded.
2) Direct lending
When difficulties arose with CCAs and they fell out of fashion, direct lending was popular for a while. This saw the law firm taking on the full cost of the loan, which made things easier for them but came with significant risks. They too were eventually put to rest.
3) Damages Based Agreements (DBAs)
DBAs are set to come into effect in 2013 and so are one of the newest funding methods available. They have been created in an effort to realign solicitors’ interests in court cases, as they will ultimately be paid a percentage of the damages. This means it is in their best interests to win the highest damages possible.
When an individual signs a DBA with a solicitor, it sets out the percentage that the law firm will receive of the damages. As yet, there is no cap on this.
4) Litigation funding
This option is predominantly available for big businesses fighting court cases with multi-million pay-outs.
Third party funding, as it is also known, is an option if a business hasn’t the funds to take a case to court. The business can contact its solicitor, who will then contact the third party funding company with an application for funding. It will then assess the case and, if accepted, the business will receive funding. The funding company puts itself at considerable risk by doing so, but the potential reward is very high. Litigation funding companies recoup the initial investment and a ROI (Return on Investment) from the damages. There are still many funding options available today, so businesses looking for funding can choose from a few different possibilities.
This article was written by Aurora Johnson on behalf of Vannin Capital, a commercial litigation funding specialist. You can find out more by visiting the official website now.