Posted by Sara Mebtouche, borrower relations associate at Legal Futures Associate Fenchurch Legal [1]
Mebtouche: Not everything needs to be funded
For many law firms and claims management firms, litigation finance is still closely associated with disbursement funding.
That is often the starting point. Disbursements are a clear and immediate cost, and funding removes some of the upfront financial pressure of running cases.
However, this is only one part of how funding can be used in practice.
Across the consumer claims market, litigation finance has developed into a broader set of funding options that can support different stages of a case. For firms managing volume, the more relevant question is no longer whether to use funding, but where it is most useful within the business.
Not every cost needs to be funded, and applying funding without a clear purpose can affect both margin and operational control.
Looking at the full cost base
In high-volume claims, financial pressure does not come from one area. It builds across the lifecycle of a case.
Firms are typically funding case acquisition and marketing, disbursements such as expert reports and insurance, and work in progress through fee-earner time.
Each of these costs behaves differently, but they all have one thing in common. Capital is committed upfront and often tied up for a long period before cases conclude.
In many consumer claim types, that cycle can run for 12 to 24 months.
When multiplied across hundreds or thousands of cases, this creates a structural cashflow challenge. Even well-run firms with strong pipelines can find growth limited by how much capital is tied up in live files.
This is where litigation finance has become more relevant. It is not just about covering one cost, but about supporting how the overall case lifecycle is funded.
Not all costs need external funding
While funding can be applied across multiple areas, it does not follow that it should be. A more considered approach is to look at where funding actually adds value.
Some costs are fixed and predictable. Others are more flexible. In some cases, costs can be deferred or structured without introducing additional expense.
Repetitive disbursements are a good example. If those costs can be deferred without interest, external funding may not always be necessary. It may improve short-term cashflow, but it also introduces a cost that could otherwise be avoided.
In contrast, funding case acquisition may allow a firm to increase intake. Funding work in progress (WIP) may allow cases to progress more efficiently by supporting additional resource.
The decision is not about whether funding is available. It is about where it has the most practical impact.
Different parts of the case carry different risk
Another factor to consider is how risk and predictability vary across the lifecycle.
Case acquisition carries uncertainty. Conversion rates, case quality and onboarding all affect outcomes.
WIP depends on internal processes, staffing and case management.
Disbursements within established claim types are often more predictable, particularly where there is a clear process and legal precedent.
These differences matter when deciding how funding should be used. Applying the same approach across all areas may not produce the best result.
In practice, firms that perform well tend to align funding decisions with both the legal characteristics of the claims and their own operational capacity.
The role of responsible funding
As the use of litigation finance has increased, so has the need to apply it carefully.
There have been examples across the market where firms have taken on additional funding and increased volumes without the systems or oversight to support it. This has led to issues with case progression, client outcomes and regulatory scrutiny.
Funding on its own does not solve these problems. In some cases, it can make them more visible.
Responsible funding means making sure that case volumes remain manageable, operational systems can support growth, and funding is aligned with how the business actually runs.
It also means recognising that not every firm or every cost base is suitable for external funding at a given time.
From a funder’s perspective, this is a key part of the process. Facilities are structured around a firm’s capacity, case types and operating model.
They are also built on historical data, allowing future performance to be projected on a realistic basis and controlled over time. Ongoing monitoring ensures that funding continues to support the intended outcomes.
The objective is not simply to provide capital, but to ensure that it is used in a way that supports stability and long-term performance.
A more practical approach to funding
For many firms, litigation finance is becoming a more routine part of how the business operates. The difference is in how it is used.
Rather than applying funding across all costs, firms are increasingly taking a more selective approach. They are looking at:
- which parts of the case lifecycle create the most pressure;
- where funding can improve efficiency or unlock growth; and
- where costs can be managed without introducing additional finance.
This allows funding to be used as a practical tool, rather than a default solution.
Working with funders that can support different parts of the lifecycle can also help. It gives firms the flexibility to apply funding where it is needed, rather than structuring the business around a single product.
Conclusion
Litigation finance is now well established within the consumer claims market, and it is no longer limited to a single use.
Firms now have access to funding across multiple stages of a case. The key decision is how to use it effectively.
That means understanding where funding adds genuine value, where it does not, and how it fits within the wider operation of the firm.
In practice, the focus is shifting from accessing funding to using it more selectively.
Because not everything needs to be funded.