Pre-Settlement Funding Basics: What It Is and How It Works

A non-recourse cash advance against a pending legal claim — repaid only from settlement proceeds, with nothing owed if the case is lost.

Pre-settlement funding is a non-recourse financial product: a cash advance issued to a plaintiff with a qualifying legal claim, secured against the expected proceeds of that claim. It is not a loan. There are no monthly payments, no credit check, and no obligation to repay if the case does not result in a settlement or favorable verdict. Repayment comes entirely from settlement proceeds, handled by the plaintiff's attorney at closing.

This distinguishes pre-settlement funding from traditional consumer loans in an important way: the funder assumes the case risk. If the plaintiff loses, the funder absorbs the entire advance. That risk profile is why funders conduct thorough case review — they are evaluating the merits of the claim, not the creditworthiness of the applicant.

Typical advance amounts range from $500 to $500,000, depending on case strength, expected settlement value, jurisdiction, and case type. Most funders advance 10–15% of estimated net recovery. Common use cases include covering medical bills, living expenses, rent, and other costs during the case — particularly when injury or disability has reduced income.

Use cases span personal injury, auto accidents, slip and fall, wrongful death, civil rights, employment discrimination, and other qualifying claims. Advances are only available to plaintiffs who have retained an attorney and have an active legal claim in progress.

Source: American Legal Finance Association (ALFA) — Consumer Litigation Funding Code of Conduct.

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