Disbursement funding is a type of loan facility primarily used by lawyers and CMC’s, (Claims Management Companies) to fund the ongoing fees and costs of pursuing a legal action, for example medical records, survey fees, expert reports and court fees.
These costs are cumulatively known as disbursements, and disbursement funding facilities pay these on behalf of the claimant.
Not many claimants themselves can afford the ongoing costs of legal disbursements, which can be a barrier to taking the legal action forward. This can mean that if the claimant lawyer or legal representative decides to take on the case, then the respective firms will have to pay the disbursement costs themselves, increasing their own liability (if uninsured) and putting a strain on cash-flow.
Therefore in order to be able to run as many meritorious legal cases as possible, many law firms now use disbursement funding loans to pay for disbursements, and free up cash from within the business.
These disbursement funding loans can take many different forms, such as a practice wide loan, which can be used for pretty much anything, including investment and expansion in their own business. Alternatively, a different sort of practice loan may stipulate that funds can only be used for drawing down on specific disbursements, and the loan principle amount will have been calculated based on the estimated number of new cases coming through the door.
Other disbursement funding options may apply to specific legal actions only, with caps on minimum and maximum drawdowns. These arrangements are not as flexible as practice loans, and can be administratively heavy if you need to seek permission for certain costs and drawdowns if not in the pre-arranged scope.
There is now a wide range of versatile and flexible disbursement funding solutions available, as the market has rapidly expanded over the last decade. These can assist law firms and legal claimants to pursue their legal disputes without incurring upfront fees, and without risk at all if an ATE insurance policy is also in place.
Some disbursement funding facilities loan directly to the claimant or consumer, and would fall under the CCA rules and regulations. These types of loans will usually cost the claimant somewhere in the region of 10% - 20% per annum depending upon what deal has been entered. This would only be paid if the legal case was successful, and would be deducted from the claimant’s damages before distribution, along with any ATE insurance premium and lawyer’s success fees.
In the event of a loss it is usual for the ATE insurance premium to pay the disbursements capital costs back, and on occasion some of the interest as well. The losing claimant should not have to pay anything at all.
It should be noted that disbursement funding and litigation funding are two separate parts of the same stable. Whereas disbursement funding tends to apply to many smaller legal disputes on a volume basis, litigation funding generally takes the form of financing large commercial disputes in isolation, where the amounts in dispute usually need to exceed £0.5m to £1.0m before a litigation funder would show much interest.
Disbursement funding is now commonly used to fund the following case types: RTA, EL/PL, Clinical Negligence, Commercial, Mortgage mis-selling, SIPPS, Plevin, Japanese knot-weed, Housing disrepair and many more.
If you are searching for a disbursement funder, we may be able to help you source the most suitable funding facility to meet your specific requirements. Please contact us as below.