Pre settlement funding refers to cash advances given to the injured party of a lawsuit in anticipation of a settlement.  Since lawsuits can often drag on for months, even years, pre settlement funding is a useful (and sometimes essential) tool both for those who bring a suit to court, and their attorneys.

Pre settlement lawsuit funding works like this:

The injured party in the suit or his/her attorney contacts a company that offers pre settlement funding.  The company evaluates the case based on information obtained from the attorney, and based on that evaluation reaches an estimate of how much the injured party can expect to receive in a settlement.  The company then advances the injured party a cash amount based on that estimated settlement.  The pre settlement funding is paid out immediately, and repaid when the actual lawsuit settlement is received.

Legal settlement funding is a must for some who find themselves unable to afford the expenses of a lengthy lawsuit, but it is not for everyone.  There are many settlement funding companies to choose from, but they can be very discriminating — and expensive.  A funding company will refuse requests from those whom they judge to have little chance of winning their case.  Additionally, those who are granted settlement funding from one of these companies will likely have to pay significant fees when the actual settlement is paid.  These fees depend on the company, as well as on the size and structure of the settlement, but are often quite large owing to the risk inherent in extending pre settlement funding.

There is an important legal distinction between pre settlement lawsuit funding and a traditional loan.  A loan is given with the expectation that the recipient of the funds will repay the amount in full, plus interest.  A pre settlement funding cash advance is designed around a specific expected amount.  Loans are also bound by state and federal usury laws, which prevent banks and other lenders from charging confiscatory fees or interest rates.  Settlement funding from settlement funding companies is not subject to the same rules in most states.

Pre settlement funding can help injured plaintiffs to stick with a difficult case.  A defendant who feels sure to lose will sometimes try to mitigate his/her losses by dragging the case out beyond the plaintiff's ability to absorb the expenses, forcing the plaintiff to settle for a much smaller amount than would otherwise be possible.  It can be risky, and there are those who argue that the availability of pre settlement funding encourages the filing of frivolous nuisance lawsuits.  But legal settlement funding can also make it possible for a truly injured party to outlast a defendant and ultimately gain all the money they are owed.