Joseph Genovesi, CEO of Balanced Bridge Funding, a legal funding company based in the Philadelphia area, has seen more competition from legal funding companies in 2022, and more lawyers and law firms that are willing to look at legal funding options as well. He expects that to continue going into 2023.
The following article is Balanced Bridge Funding’s summary of the State of The Legal Funding Industry Report, published by Bloomberg Law in 2023.
In their latest survey, according to their website, Bloomberg Law surveyed several legal professionals, lawyers, and legal funding companies to gain insight into what is happening in the Litigation Finance Industry (also called Legal Funding Industry). This article is a summary of key findings and insights we believe are useful and will be of interest to lawyers as well as members of the Legal Funding Industry from that report.
Important Numbers from the Bloomberg Law 2023 State of the Legal Funding Industry Report
- 85% of legal funding deals obtained by lawyers were used to cover a combination of working capital, fees, and costs (54%) or just cover fees and costs (31%).
- 78% of cases financed by legal funding companies were single case financing either to the claim holder or law firm
- 96% of legal funding deals are non-recourse transactions
- 72% of lawyers reported an increase in business since March 2020
- 59% of legal funding companies reported an increase since March 2020
- 69% more likely to seek legal funding than five years ago (lawyers)
- 32% of lawyers report they are more likely to seek legal funding now
Source: Bloomberg Law’s 2023 State of the Legal Funding Industry Report
What are the Most Important Factors to Lawyers in Choosing a Legal Funding Company?
#1 Most Important – Financial Terms Offered by the Legal Funding Company
#2 Reputation – of the Legal Funding Company
#3 Successful Track Record – of the Legal Funding Company
Source: Bloomberg Law’s 2023 State of the Legal Funding Industry Report
It is worth noting that according to the survey, a personal connection was listed as LEAST IMPORTANT when it came to deciding on which legal funding company law firms wanted to work with. According to the survey, law firms are looking for the best financial terms for legal funding, and the reputation of the legal funding company when deciding which legal funding company they want to work with.
What Type of Funding Arrangements are Most Common – Recourse, or Non-Recourse?
According to the study, 96% of legal funding deals were non-recourse transactions, meaning the legal funding companies are taking the risk. If the defendant doesn’t pay, the legal funding company is doesn’t get paid.
Source: Bloomberg Law’s 2023 State of the Legal Funding Industry Report
What Legal Practice Areas Use Legal Funding the Most?
According to the survey the legal practice areas that use Legal Funding the most are:
- Commercial Litigation (32%)
- Patent Law (24%)
- International Arbitration (16%)
- Bankruptcy (12%)
- Insurance/Insurance Defense – and – Antitrust tied for 5th place at (8%)
Source: Bloomberg Law’s 2023 State of the Legal Funding Industry Report
As you can see from the numbers taken from the survey, Commercial Litigation and Patent law make up 56% of law firm practice areas making use of legal funding.
Does Legal Funding Enable Better Access to Justice?
According to the survey, 88% of lawyers believe legal funding does enable better access to justice, while 100% of legal funding companies believe legal funding enables better access to justice
Source: Bloomberg Law’s 2023 State of the Legal Funding Industry Report
But what does it mean to “enable better access to justice?” In general, we can tell you from our experience in the legal funding industry that one of the tactics employed by defense attorneys is to stall cases for as long as they can. If law firms or clients were short on money, they might agree to a settlement just to “get it over with” because they needed the money. But with legal funding, both plaintiffs and law firms have been better able to endure these long waits (by getting some of their money up front), allowing attorneys to win larger settlements for their clients. This is just one example of how legal funding provides better access to justice for clients.
How Has The Economic Downturn (since March 2020 According to the Study) Impacted the Legal Profession?
According to the survey, 72% of lawyers surveyed reported an increase in business since March 2020.
Source: Bloomberg Law’s 2023 State of the Legal Funding Industry Report
How Is The Economic Downturn (since March 2020 according to the study) Impact the Legal Funding Profession?
According to the survey, 59% of Legal Funding Companies reported an increase in business since March 2020.
Source: Bloomberg Law’s 2023 State of the Legal Funding Industry Report
Summary Bloomberg Law’s 2023 State of the Legal Funding Industry Report
With 72% of lawyers and 59% of legal funding companies reporting an increase in business since March 2020, it appears, at least according to this small survey, that the pressures created by Covid, and the Federal Reserve Banks’ attempts to contain inflation are not yet (and may not) have a hampering effect on lawsuits or the legal industry (including Legal Funding Companies) in general.
It also appears that the use of Legal Funding is gaining a much more widespread acceptance, especially over the last five years as 69% of law firms reported seeking legal funding versus five years ago and 32% of law firms responded seeking legal funding now.
Lawyers and Legal Funding Companies both agree that legal funding is helping their clients better achieve justice.
Two legal practice areas account for over half of all users of Legal funding; they are Commercial Litigation and Patent Law.
The majority of legal funding deals are secured for single cases (as opposed to class action lawsuits or MDLs).
In general, from the statistics and from our own experience at Balanced Bridge Funding, it is apparent that the legal funding industry is growing, as is its acceptance within the legal industry. More law firms are aware of legal funding companies, and over time, more lawyers and legal professionals are willing to make use of legal funding.
About the Authors
Balanced Bridge Funding offers legal funding solutions for plaintiffs, plaintiff attorneys, attorneys, and law firms. To speak with one of our legal funding specialists about getting help managing your law firm cash flow, please call (267) 457-4540 or email: info@balancedbridge.com
Summary of the Bloomberg Law’s 2023 State of the Legal Funding Industry Report – The Complete Infographic
