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What is definition of Pre-settlement funding?

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Wiki User
January 08, 2011 11:13PM

Pre Settlement funding is a cash advance on a non recourse basis against a lawsuit. A lawsuit will be either a personal injury case or a business dispute ie. commercial litigation. The money is loaned to you and if you lose your case, you owe nothing. If you win you will pay back the loan with interest. In summary its a cash advance before a settlement.

Added:

Pre settlement funding is a non recourse cash advance against a pending lawsuit. Pre settlement funding is typically loaned on a non recourse basis by a private investor or hedge fund.

Pre settlement funding is typically used as a way to wait out a lawsuit for a larger settlement. When this financial tool was first introduced the rates were extremely high due to lack of competition. Over the last ten years more companies and funds have entered into the space, making the rates more competitive.

Most lenders will tell their clients that pre settlement funding should only be used as a last resort.