Posted on the 24th July 2015

Litigation is a minefield for small business owners. How are you to know which lawyer can get you the result you need, when everyone you speak to – pound signs in their eyes – is telling you they’re more than up to the task? How are you to manage spiralling financial costs? How do you know you’re pursuing your claim in the best way?

Third-party litigation funding is an excellent way to manage your financial, personal, and legal risks. Here’s how it can help you at every stage of your claim.

1. Liability… or asset?

One reason that businesses have avoided pursuing justice in the courts is that claims can been seen as liabilities. This is hardly surprising: using a typical retainer pay structure, the monthly outgoings associated with taking your claim to court look awful to your company accountants – and potential investors.

Equally, you can’t always rely on lawyers to give you the most objective appraisal of your legal chances: they’ll see an opportunity to take on a new client, and they won’t necessarily give you the fullest possible account of your case’s strengths and weaknesses. So you start your claim with considerable uncertainty.

This is where litigation funding can help. It removes these problems. Firstly, funders aren’t interested in cases they can’t win. They don’t get paid in the event of a loss, so they’re not going to take on a sure-fire loser. Furthermore, funders have access to lawyers who can get the job done and their business relies on referring you to them – something that isn’t true for other lawyers who advise you and need to retain your business.

Litigation funding actually turns your case into a genuine asset: instead of monthly solicitor’s fees, any numbers are recorded as a ‘contingent asset’ – an incoming number, representative of your final award. This can make you more attractive to potential investors.

2. Managing your risk

Litigation funders can help you with the next step too: deciding how much risk you should assume when fighting your case. That is, determining how much company money you’d be prepared to invest in your claim in exchange for the desired return. Traditionally, businesses had to absorb all of the risk. They had to pay legal fees: the lawyer’s fees, of course (this part can now be covered by no-win no-fee arrangements) but also further, hidden, costs like paying for expert witnesses. If you’re not one hundred percent sure of the outcome, this is a dangerous – potentially devastating – game to play.

A smarter move is to take advantage of new litigation funding options that let you manage your risks in the most comfortable way. You can choose exactly how much of your money you want to invest in your claim. For example, you could put up £5,000, or you could let your funder take on all the risk and pay for everything in return for a higher share of the compensation if you end up winning.

Lawyers and funders can provide more specific guidance, but the decision about how much risk you take on is ultimately based on your individual judgement of what will work for you.

3. Ready yourself for battle

You’ve finally assembled your crack squad of funders, lawyers, and other relevant supporting players in an excellent legal team. You’ve got the manpower; now you need to know how to use it. History is full of examples of underdogs overcoming the odds to win battles – but for every Stirling Bridge, there is a Falkirk; for every Battle of Marathon, a Charge of the Light Brigade.

As Sun Tzu said, “The supreme art of war is to subdue the enemy without fighting” – and it’s just as true of litigation. A generous settlement is usually much better for businesses: it’s faster (litigation can take years to come to fruition) and it allows both parties to come to an accord without any ugliness, potential embarrassment, or public airing of dirty laundry. Additionally, staged funding agreements (SFAs) mean you can usually negotiate with your funder to pay less in the event of a settlement. Sometimes it won’t be possible, of course: opponents don’t want to give you money, and if they offer you a pitiful sum or insist on taking it to court, you may have to go all the way.

At this stage of the process – as with every other – you’ll still have your funder at your back.

Want to take a claim to court, but don’t know where to start? Talk to our litigation funding experts today.