Debunking common myths about litigation funding: setting the record straight

July 11, 2023

Debunking common myths about litigation funding: setting the record straight

While litigation funding has become increasingly recognised and accepted, it is often misunderstood.

With a myriad of myths and misconceptions surrounding it. In this article, we aim to debunk some of these common myths, providing clarity about litigation funding’s true nature and purpose, and setting the record straight.

Myth 1: Litigation Funding is only available for large-scale cases

One prevalent myth is that litigation funding is only available for high-value, large-scale cases. However, the reality is that some litigation funders provide funding for a diverse range of cases, both large and small. The scale of a case is not the only determining factor; what matters more is the case’s merit and potential for a successful outcome.

At Sentry, our Rapid Raise funding product is designed specifically to meet this demand for funding in smaller cases. Automated funding is available from a panel of litigation funders for lower value claim sizes that need funding from £1,000 to £500,000 in funding.

Myth 2: Litigation Funding is a form of loans or advance

Litigation funding is often mistaken for a loan or advance, but this is not accurate. Unlike a loan, litigation funding is non-recourse, meaning if the case is unsuccessful, the claimant does not have to repay the funding.

This non-recourse nature significantly reduces the financial risk for claimants, distinguishing litigation funding from traditional loans or advances.

So how does a litigation funder get paid? If a claim is successful, the litigation funder is normally paid either a percentage of the damages awarded, or a multiple of the amount it invested in the case.

Myth 3: Litigation Funding is only for people who can’t afford legal fees

The misconception that litigation funding is only for those who cannot afford legal fees is far from the truth. While it does provide an invaluable resource for claimants with financial constraints, it is equally beneficial for those who can afford to pay.

Litigation funding can help manage and distribute risk, freeing up capital for other purposes and preserving the claimant’s financial stability during the litigation process.

Dispelling litigation funding myths and clearing up misconceptions

As we debunk these common myths about litigation funding, it becomes apparent that litigation funding is a versatile financial tool that can be leveraged by claimants across various situations. Whether it is enabling access to justice for those with financial constraints, managing risk for those with sufficient funds, or supporting cases of all sizes, litigation funding plays a vital role in the legal landscape.

Understanding the realities of litigation funding is essential for making informed decisions and leveraging its full potential. At Sentry, by debunking litigation funding myths, we aim to dispel misconceptions and provide a clearer, more accurate picture of this valuable resource.

July 11, 2023