Is Lawsuit Funding a Loan? Non-Recourse Funding Explained

One of the most common questions we hear is simple: is lawsuit funding a loan? It is a fair question. You receive money now and pay it back later. That sounds like a loan. But the way it works is different in some important ways.

The short answer

Pre-settlement funding from Green Street Funding is non-recourse. You repay it only from money you recover in your case. If you lose your case, you owe nothing. That single feature is what sets it apart from a traditional loan.

How a traditional loan works

With a personal loan, a credit card, or a payday loan, you owe the money no matter what happens. The lender looks at your credit and income. You make monthly payments. If you stop paying, the lender can send you to collections, report you to credit bureaus, and in some cases sue you. Your obligation does not depend on anything except your promise to pay.

For someone who was just injured and cannot work, that kind of debt can be dangerous. Missed payments can pile up quickly and damage your credit for years.

How non-recourse funding works

Non-recourse funding flips the risk. The funding company looks at your case, not your credit. It advances money based on what the case may be worth. Then it waits.

• No monthly payments. Nothing is due while your case is pending.
• No credit check to qualify. Approval depends mainly on the strength of your case.
• Repayment comes from your recovery. When your case settles or you win, your attorney pays the funding company from the proceeds.
• If your case is lost, you owe nothing. The funding company absorbs the loss.

Because the funding company takes on real risk, it reviews each case carefully. All funding is subject to underwriting approval.

Why the legal label matters

Different states treat lawsuit funding in different ways. Some have specific laws that regulate it. Others rely on court decisions. In many places, true non-recourse funding is not considered a loan because repayment depends on the outcome of the case. Rules vary by state, and availability varies by state too. Your attorney can explain how things work where you live. This article is general information, not legal advice.

The cost of funding

Non-recourse funding is not free. The funding company is taking a real risk, and its fees reflect that. The amount you owe usually grows over time while the case is pending. How that growth is calculated depends on your agreement.

That is why it matters to:

• Read the full agreement before signing.
• Understand how the amount owed changes over time.
• Ask whether there are any application or processing fees.
• Review everything with your attorney.
• Take only the amount you truly need.

A reputable company will answer your questions in plain language and put every term in writing.

What happens if my case settles for less than expected?

This is a good question to ask before you sign. Your agreement should explain what happens if the recovery is smaller than hoped. With non-recourse funding, repayment is tied to your recovery. Read that section of your contract closely and ask your attorney to walk you through it.

Does taking funding affect my case?

No. The funding company does not become a party to your lawsuit. It does not control your case or decide whether you settle. Your attorney continues to represent you. In most situations, the defendant and the insurance company are not part of your funding agreement.

In fact, many plaintiffs find that funding helps them make better decisions. When the rent is covered, you can let your attorney take the time needed to pursue fair value rather than grabbing the first offer.

Is non-recourse funding right for me?

It depends on your situation. If you can manage your bills while your case is pending, you may not need funding at all. If you are under real financial pressure, it may help. Talk it over with your attorney and with your family.

Some questions to ask yourself:

• How much do I need to cover essentials over the next few months?
• Do I have other options, like savings or help from family?
• Do I understand exactly how much I could owe at different points in time?

You can learn more about the process in our guide to the cases we fund, or have your attorney visit our attorney page.

Talk to us

If you have a pending injury case and an attorney, we are happy to review it and explain our terms clearly, with no pressure. Start your application here.

This article is general information, not legal or financial advice. Talk to your attorney about your specific case.

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