How Litigation Funding Is Priced

What are the common pricing structures?

Pricing depends on risk, duration and size. As a general market reference, funder returns are often structured as a multiple of 2–4x the capital deployed, or 20–40% of net recoveries, or the greater of the two, often increasing over time. Your actual terms are set out in a term sheet before any commitment.

A capital multiple links the funder’s entitlement to the amount actually deployed. Clarify whether the quoted multiple includes the return of that capital. A 3x total multiple on USD 1 million means USD 3 million in total, comprising USD 1 million capital and USD 2 million additional return; it does not mean USD 4 million.

A percentage structure links the return to a defined recovery amount. “Net recovery” must be defined: taxes, counsel’s deferred fees, enforcement expenses and other deductions may change the base. Ask how non-cash settlement, instalments, interest and currency conversion are treated.

What does a hybrid or time-based model mean?

A hybrid “greater of” model compares a capital-multiple entitlement with a percentage entitlement and applies the larger amount under the contract. It is not necessarily the sum of both. The agreement should explain any cap, priority and treatment when the available recovery is insufficient.

Time-based ratchets can increase the return at stated dates or milestones. Longer disputes tie up capital and create additional uncertainty, but the exact triggers must be explicit. Ask whether enforcement, appeals or a payment delay continue the ratchet and model an early settlement against a delayed partial recovery.

What is a distribution waterfall?

A waterfall is the contractual order in which recovered proceeds are allocated. The illustration below returns deployed capital first, then the additional funder return, with the balance to the claimant. It excludes taxes, interest, lawyers’ deferred fees and any other liabilities to keep the arithmetic clear.

Illustrative only — not an offer. The illustration assumes USD 10 million is collected, USD 1 million is deployed and the total capital multiple is 3x. Real agreements may use different priorities, definitions and returns. A smaller recovery can materially reduce or eliminate the claimant’s balance.

What affects the terms?

Merits risk, the reliability of loss evidence, forum, likely duration and the defendant’s ability to pay all affect pricing. Enforcement across jurisdictions may need specialist counsel and additional spend. Claim value should be considered against realistic settlement value, not just the most optimistic pleaded amount.

We typically review claims of USD 2 million and above and funding budgets from USD 250,000 to USD 5 million. Claim value at least 8–10 times the required budget is one review consideration. These figures are not an eligibility guarantee, and larger budgets or portfolios are assessed case by case.

What should I check before signing?

Terms are agreed case by case and set out in a term sheet before any commitment. Ask your independent lawyer to review the definitions of capital deployed and recovery, waterfall priority, termination rights, settlement consultation, extra-budget obligations and adverse costs.

Request numerical scenarios for a quick settlement, full trial, appeal, delayed enforcement and partial recovery. Compare the amount left to you after all deductions rather than choosing solely by a headline multiple. This page is general information, not financial or legal advice and not an offer of securities.