Securing litigation funding is no easy task. More than 95% of applicants get rejected, often because they can’t present funders with the data they need. Law firms with outdated or disorganized case management systems risk missing out on critical funding opportunities.
A strong case management system helps firms track case progress, organize financial data, and provide funders with clear insights into case value, expected legal costs, and risk. Funders don’t just look at case merit—they assess whether a firm has the infrastructure to manage cases efficiently. Funders may see it as a red flag if a firm can’t quickly provide accurate case data.
Investing in an effective case management system isn’t just about keeping files in order. It improves funding approval rates, streamlines due diligence, and gives firms a competitive edge in securing financial backing.
How a Case Management System Enables Access to Litigation Financing
A well-structured case management system increases the chances of securing litigation funding. Here’s how:
Funding Vs. Loans
A law firm could apply for a loan, but that’s not necessarily the best option. For one thing, if the case is lost, the borrower firm must still repay the loan. Litigation funding is called “non-recourse.” That is, the funder receives a return on their investment only if there is a recovery in the case. If the case is lost, the law firm has no repayment obligation. This is the generally agreed-upon criteria.
However, like traditional lending, litigation funding is also subject to an application and underwriting process. Getting approved for litigation funding is a difficult process for a law firm, with over 95% of applicants rejected.
Getting Funding Approval
To be approved for litigation funding, the firm must show the funder that it is a good credit risk. The funding entity will conduct due diligence to determine the firms’ eligibility. With a high number of rejections, firms must show the funder that it is a worthwhile investment.
One thing that a law firm can do to increase the odds of success is to provide the potential funder with clean and accurate data about the firm’s cases from its case management system. This is especially true of personal injury and mass tort firms who handle hundreds and even thousands of cases every year.
As with any type of investment, a potential investor performs due diligence before handing over any funds. The due diligence process is when the funders analyze the firm’s docket of cases to put a value on each of them. From this value, they can then estimate what the firm’s legal fees will be, and how much they might recover. This is the collateral that guarantees the funding. The better your collateral, the more confident they are about loaning you funds with better terms.
Litigation funders value a firm’s cases through their due diligence a firm’s cases. They need information about the cases such as:
· The current legal status of the case
· Is the file complete?
· Are there any co-counsel splits on the attorney fees?
· Are there medical records that prove the alleged injury?
The funding entity will have its own procedures for evaluating an investment into a law firm’s collateral. Some will conduct the work with in-house counsel, while others may have outsourced counsel perform their due diligence.
Funding Approval with Case Management
A litigation funder looks at every aspect of a firm’s cases before making a loan offer. A plaintiff law firm must answer the question that every funder will be asking, “Can I reasonably expect to be repaid based on the value of this docket?”. So how can you increase the value of your collateral? The more you can show funders that you have strong cases, the more they will become confident in funding your firm’s cases.
Clean and accurate data is the key to demonstrating to a funding entity the firm’s worth. This is where many firms with obsolete or non-existent case managements systems fail. The funder may ask the firm to provide a list of all cases that are past summary judgment or within six months of a trial date. They could ask a firm to provide a list of the cases that represent the top 30% of the firm’s expected fees over the next year. Or they could ask the firm to provide statistics of how many new clients were signed monthly for the past 6 months. Each of these data points give the funder important information about the health of the firm and the ability to forecast revenues into the future. This is vital information that funders need to provide you with their best interest rates and the best terms possible.
Firms that have robust case management systems can provide answers to these questions quickly and easily. Good case management helps you get a better interest rate from a funder as well as improving your firm’s efficiency, benefiting clients. Plus, it will also take a huge burden off the firm when it’s time to provide the funder with the required quarterly updates on cases.
Is your firm using an up-to-date case management system? If not, it could cost the firm thousands of dollars in both lost productivity and higher interest rates for your litigation funding. Before you look for litigation funding, review your case management system first, and upgrade if necessary.
What Case Management Features Do Litigation Funders Look For?
Litigation funders evaluate law firms based on the strength of their case data and financial controls. A well-implemented case management system improves a firm's chances of securing funding by offering:
- Financial tracking capabilities – Funders expect detailed cost projections, budget monitoring, and return-on-investment calculations.
- Comprehensive document management – Organized case files, including pleadings, medical records, and financial statements, streamline due diligence.
- Automated reporting features – Funders want easy access to case updates, projected timelines, and settlement likelihoods.
- Risk assessment tools – Systems that analyze case strength, liability exposure, and damages calculations help funders evaluate potential returns.
- Milestone tracking – A case management system should clearly outline key litigation events, such as depositions, motions, and trial dates.
- Outcome probability analysis – Funders assess data-driven projections to determine a firm’s likelihood of success.
- Secure data sharing protocols – Protecting sensitive client and case information is critical to maintaining confidentiality during the funding process.
Law firms that provide funders with transparent, real-time data on case performance and financial viability stand a much better chance of securing litigation funding.
Conclusion
Litigation funding is a valuable resource for law firms, but securing it requires more than a strong legal claim. Funders look at financials, case data, and a firm’s ability to manage its docket efficiently. Firms risk delays, rejections, and higher funding costs without a well-structured case management system.
Investing in a sophisticated case management system gives law firms a competitive edge. It streamlines the funding application process, improves financial tracking, and ensures cases are organized for funders’ due diligence. In a competitive legal landscape, firms prioritizing case management will have better access to litigation funding and more control over their financial future.
FAQs
What documentation system best supports litigation funding applications?
A case management system that offers comprehensive document storage, automated case tracking, and financial reporting improves funding applications.
How can organized case files improve funding chances?
Funders need clear, accurate case data. Well-maintained files speed up due diligence, making it easier to assess case value and risks.
Which case organization mistakes hurt funding chances?
Missing documentation, incomplete case files, and disorganized financial records make it harder for funders to assess investment potential.
Which case management tools best support funding requests?
Tools with built-in reporting, risk assessment, and secure data-sharing features help law firms present a strong case to funders.
