Debunking Six Myths About Litigation Finance
Litigation finance, often called litigation funding, is a useful cash-flow tool for law firms handling large portfolios of consumer claims. Yet many solicitors still hesitate, believing funding is expensive, repayment terms are rigid, or they’ll lose strategic control. In reality, loan facilities from funders such as Fenchurch Legal are flexible, transparent and designed to protect your margins and autonomy.
Below, we debunk six myths and show how a well-structured funding partnership can fit law firms while leaving your firm firmly in control.
Myth 1 – “Funding only makes sense if you borrow tens of millions.”
Reality: Flexible litigation funding can start far smaller. Unlike funders that focus solely on multi-million-pound cases, specialist funders like Fenchurch Legal tailor loan facilities to match your firm’s needs, whether that’s £500k to launch a new PCP claim stream or £5 million to boost your successful housing disrepair portfolio.
Drawdown what you need, when you need it, and once repaid, it replenishes your facility, making more funds available for future drawdowns. You avoid the dead weight of unused debt and keep interest aligned with real, billable work in progress.
Myth 2 – “The funder will take a slice of the damages.”
Reality: The high-volume consumer-claims model offered by funders like Fenchurch Legal is a loan facility, not a contingency stake in the case outcome. You keep 100% of your client’s award and repay only the principal, an agreed origination fee, and the interest that accrues during the lifetime of the case. There is no success fee, no percentage of damages, and no uplift if the case exceeds expectations. For firms that value predictable outcomes and want to avoid sharing damages with a funder, the loan structure is often the cleanest route.
Myth 3 – “Litigation finance is expensive with hidden fees.”
Reality: Cost must be weighed against cash-flow impact and opportunity cost. For firms running thousands of no-win, no-fee claims, locking up the business capital is often costlier than paying a flat origination fee and a clear, simple interest rate.
Yes, headline interest may be higher than a traditional overdraft, but once you factor in arrangement fees, covenants and refinancing charges, bank loans could end up costing the same.
Funders such as Fenchurch Legal offer facilities with transparent pricing, clearly stated on day one, your firm knows the exact cost of the origination fee and interest rates. There are no draw-down penalties, no early repayment charges, and no hidden fees.
Myth 4 – “Bank loans appear cheaper.”
Reality: On paper, traditional banking loans can offer lower headline rates, but the flexibility gap is real, and these types of loans rarely sync with litigation timelines.
A fixed loan repayment schedule might clash with court delays, forcing law firms to refinance or divert working capital at the worst moment. Funders structure litigation funding facilities around the expected case timelines, and if a case overruns, they can extend terms. Interest stops the day you settle and repay, so you never pay for money you are not actively using. Settle in nine months and you pay nine months’ interest, not two years.
Myth 5 – “Personal guarantees put personal assets on the line.”
Reality: Personal guarantees do exist, they are not unique to litigation finance, and they form part of a funder’s security package but think of it as a last-resort safeguard, not the first port of recovery. First in line is the After-the-Event (ATE) insurance and then the assignment of proceeds from cases.
Guarantees simply align interests and keep pricing competitive; they rarely come into play, as most law firms act in good faith and meet their obligations.
Myth 6 – “My funder will take control of my firm and cases.”
Reality: Your firm remains firmly in the driver’s seat. Litigation finance is a loan facility; it doesn’t take a stake in your business or dictate how you run cases.
Funders underwrite the loan, issue the capital to fund the claims and monitor the overall progress. A clear facility agreement sets out the funding criteria and leaves day-to-day case management where it belongs: with the lawyers who win the cases.
A Partner, Not Just a Lender
Debunking these myths shows that litigation funding is not a costly burden but a strategic tool that law firms can use to help with cash flow and accelerate growth whilst retaining control of their business and cases. By combining transparent pricing, flexible terms, and security structures that protect all parties, specialist lenders such as Fenchurch Legal turn finance from a line-item expense into a genuine growth partner.
Contact us to find out more about funding solutions.
