Ok, we get it, lawsuit funding requests are not the highlight of a personal injury attorney’s day. Nevertheless, it’s important to proactively look out for your clients, it will save you headaches down the road.
Inform your clients
An informed client will make better decisions. Better decisions can help ease hassle at settlement time. Tell your clients to exhaust all other options before looking for lawsuit funding. If they can borrow from friends or family, this can often save them a lot of money.
If your client really does need funding, make sure they understand the mechanics.
Lawsuit funding is expensive
Even the absolute best rates in lawsuit funding come out to about 30% per year. The average 30 year mortgage rate in the US is hovering just under 4%.
An asset backed, personally guaranteed mortgage is nothing like pre-settlement funding, but the rate differential serves as an easily understood benchmark.
At the end of the day, your client will do whatever they think is best, but it’s important to give clients the tools they need to make good choices.
Minimizing funding – what do they absolutely NEED to get by?
Budgeting isn’t easy for anyone. It can be especially tough if your client is out of work as a result of their injuries.
Have your clients come up with a basic budget that extends through the duration of their case. Try to get them to come up with a realistic figure for monthly expenses.
If they receive benefits or have some income, have them estimate the difference between cash inflow and outflow on a monthly basis.
Once they have this laid out, it’s important to give them a decent estimate of…
Case value and time to settlement
When clients go out looking for funding, they often have a lofty view of the value of their case, and under-appreciate the time to settlement.
From the start, it’s important to be realistic about their case and its value prospect. Be conservative. Your client is making a major financial decision based on your estimates.
As you move forward with the case, continue to set realistic expectations about how long you think the case might take.
Pulling it all together
Once we have the monthly net-cash burn, and even a vague idea of time-to-settlement, your client will have an idea of what they might need in funding over the course of their case.
Depending on how far treatment has progressed, it may make sense to only take a small amount of funding upfront. If your client is scheduled for surgery, it may make sense to get a larger chunk of funding thereafter. They might be able to get better terms.
Funding now can mean much less money later
When your client approaches you about funding, illustrate clearly how much might need to be paid back out of their settlement.
Try to show them honestly what the amount they borrow could grow to based on terms you’ve seen on other clients’ contracts. Show them how much of their settlement will be left, after medical liens, your fees and this new funding.
If you’ve given them a decent picture of what to expect, they are less likely to regret funding later.
Try to guide clients to companies with decent rates
Even if they ask for a bit more documentation, a funder with good rates and low fees can be a godsend. If the case ends up taking longer than expected, or your client has an urgent need for funding at a later date, they’re more likely to be able to do so if their advance hasn’t ballooned.
Tell your clients to take their time and compare options
Don’t let them be bullied by an aggressive funding company. Let them know that they can likely shop around once they’ve received a funding offer, and that most funding companies are willing to bargain.
Tell them to ask about rates and fees upfront, and give them some benchmark for what is reasonable or unreasonable.
Lastly, make sure your client understands the contract they are signing
Every reputable funding company shows terms and a payoff table clearly on one page. Despite this, your client might not understand the entirety of the arrangement.
If there is a minimum on the contract, make sure they understand they are charged up to a half-year of interest on day-one.
Still treating or expect a lengthy process? Explain how compound interest can affect payback over the long term.
Does the contract only show a limited duration payoff table? Have the client ask for an extended payoff table that shows interest accrual over the next few years.
Your clients will look to you for advice during the process. Some attorneys try to wash their hands of funding by advising against it without offering advice. This makes it extremely tough for clients to get decent terms because of the massive information mismatch between them and funding companies. Let clients leverage your experience in their time of need.
Uplift Legal Funding
Uplift Legal Funding is happy to help your clients through the process of lawsuit funding. We offer leading rates and fast turnaround. Have your client apply online or give us a call anytime at (800) 385-3660.