Recourse Funding

Recourse funding in the litigation finance context refers to arrangements where the funded party retains some repayment obligation regardless of case outcome — for example, a line of credit secured against a firm's receivables rather than a pure share of proceeds. Recourse structures are more common in law firm financing and portfolio facilities than in single-case consumer or commercial funding. Because the funder holds a claim against the borrower independent of litigation success, these arrangements may be treated as conventional lending and subject to different regulatory treatment. The pricing on recourse facilities is typically lower than non-recourse funding, reflecting the reduced risk to the capital provider.

Because the funder holds a claim against the borrower independent of any single case's outcome, recourse facilities are underwritten more like conventional secured lending — against a law firm's aggregate receivables base rather than the merits of any specific matter — which is why pricing on recourse structures runs materially lower than non-recourse litigation finance. Funders offering recourse facilities still monitor underlying case quality, since a firm's receivables are only as good as the claims generating them, but the credit analysis leads rather than the merits analysis.