Traditional Litigation Funding would have involved a ‘funder’ to agree a percentage portion of all legal costs associated with running a claim.
The funder would then agree an amount of money to assist in the running of the case and an agreed level of interest paid either monthly, or in some cases deferred to the backend of the case.
If the case was unsuccessful, then either the funder would in-fact lose the deployed capital and any possible interest that had accrued, or the Law Firm, as they deemed the case had a high prospect of success, would in fact be responsible for paying the ‘loan’ back to the funder.
As these ‘Loans’ are deemed as ‘Balance Sheet Lending’ the risk for both the Funder and the Law Firm is substantial, only the largest cases, with very high Quantum and recoverable costs end up being funded.
Historically, due to all of the above reasons, organisations within this space are global entities that will ‘cherry pick’ the extremely large Commercial Litigation cases where millions of pounds are ‘loaned’ on an individual case.