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In any endeavor in which the origination of new business involves work and/or expertise, there will be persons willing to offer such service/expertise for profit. The business of lawsuit loans or cash advance funding for pending cases is really no different in this regard. Previously, we discussed some of the benefits brokers offer to those seeking pre-settlement loans. In this article we will examine exactly what function a lawsuit funding broker serves in the business and examine the cost associated with this specialty.
Let us first define what we are talking about when we use the term "broker". For purposes of the lawsuit funding industry, a broker is a person(s) or entity which originates new business for lawsuit cash advance companies and serves as a liaison between the applicant and the company. As stated before, origination is a vital part of any business. Therefore, brokers want to be compensated for their efforts. After all, it is not as easy as throwing up a website and answering a few phone calls.
Lawsuit funding brokers originate business in a variety of ways. Some focus efforts on historically effective marketing mediums such as print ads or mailers. Other brokers utilize the internet and market their service on the web. Still others market to attorneys with whom the broker creates a working relationship. Regardless of the way the business is generated, the brokers job is to get clients funded.
To this end, the broker must:
1. Get the client to call.
2. Compile the necessary paperwork.
3. Choose the appropriate lawsuit loan funder and submit the case.
4. Monitor the progression/status.
5. Field the clients calls and questions.
6. Forward the funding agreement to the client and the attorney.
7. Field questions regarding the contract and its terms for funding.
8. Secure and forward the Lawsuit Funding Contract to the funding company.
9. Confirm the client receives the cash advance.
Because lawsuit funding brokers offer the above and they expect to be paid for their time and expertise, brokers charge fees which are added on to the amount of the contract. Generally, broker fees for funding contracts range from15%-20% of the amount the client. Sometimes they are negotiated downwards on very large cases. However, it is important to remember that pre-settlement funding brokers work tirelessly answering questions from both clients and funders alike. Also, valuable time and expertise is often uncompensated as cases are denied funding for a variety of reasons.
Equally, and perhaps more important is the effect of a broker commission on the ultimate payoff of the lawsuit loan or pre-settlement funding transaction. Because the client often needs a specific amount of money, he usually does not want the broker commission to be deducted from his portion. But because the broker must be paid, the amount of his "commission" is added to the contract amount. Yet the amount of "interest" charged for a cash advance is not calculated on the amount the client receives but on the amount of the contract. So essentially the client is paying interest on money he did not receive.
Nevertheless, brokers serve an important function for clients and funders alike. Brokers give clients additional access and expertise that otherwise may not be available to clients dealing directly with a lender. Brokers help lenders in the origination business so that they can focus on other aspects of the lawsuit funding industry.
Ultimately, each client must decide whether to use a broker in lawsuit loan transaction. As with everything else, the value added versus the costs associated with this decision are subjectively determined.
Thank you for your interest in the lawsuit funding business.
pmc
