Funder vs. Broker

A funder is the actual source of capital — the entity underwriting the claim and deploying its own or its fund's balance sheet. Claimants and firms work directly with a funder when they want the underwriting decision, the terms, and the capital relationship to run through a single accountable counterparty, and when they already know which funder's criteria and appetite fit their specific claim.

A broker is an intermediary who does not deploy capital directly but shops a claim to a network of funders to find terms, taking a fee or a share of the arrangement for the introduction. Claimants or firms use a broker when they lack existing relationships with funders and want help navigating the market, particularly for less common claim types where identifying the right funder is not obvious. This is common for claim types or jurisdictions outside a claimant's or firm's usual area of practice.

The funder receives case materials, underwrites the claim directly against its own criteria and models, negotiates terms, and — if approved — advances capital under an agreement it holds and monitors through resolution. There is no intermediary fee embedded in the pricing beyond the funder's own return, and the claimant deals with the same counterparty from application through repayment.

The broker collects case information, packages it, and shops it to multiple funders simultaneously, comparing terms on the claimant's or firm's behalf. Once a funder is selected, the broker typically steps back from ongoing monitoring, which remains between the claimant and the funder, though some brokers retain a role in coordinating documentation through closing. The broker's compensation is typically finalized once the funder is selected, regardless of how the underlying case ultimately performs.

Pricing reflects only the funder's own required return on the capital deployed — there is no additional layer of compensation for a third party sitting between the claimant and the capital source, which can make a direct relationship the lower-cost path when the claimant already knows the right funder to approach. This makes a direct relationship the more economical path whenever the claimant has done, or can do, that matching work itself.

Pricing includes the broker's fee or referral compensation on top of whatever the ultimate funder charges, which can mean a higher all-in cost than going directly to a funder, though the broker's access to multiple funders can also produce more competitive terms through comparison shopping that offsets some or all of that added cost.

The funder bears the underwriting risk directly and is the counterparty for the life of the agreement — there is no intermediary relationship to manage if a dispute or a modification arises later in the case, simplifying any renegotiation if circumstances change.

The broker bears no underwriting risk and typically has no ongoing obligations once the deal closes, so any issue that arises during the life of the funding agreement is between the claimant and the funder, not the broker, meaning the broker relationship offers no protection once the deal is signed. Any renegotiation, modification, or dispute that arises later falls entirely to the claimant and the funder to resolve directly.

Going directly to a funder wins when the claimant or firm already has, or can build, a direct relationship with a funder whose criteria fit the claim, avoiding an intermediary layer of cost and simplifying the relationship to a single counterparty.

Using a broker wins when the claimant or firm has no existing funder relationships and values having one party compare multiple funders' terms rather than approaching each funder independently, particularly under time pressure or for an unusual claim type. A broker's market knowledge can be especially valuable when the claimant has no prior experience evaluating funders at all.