Clinical negligence funding – What is expensive?
4th April 2014
Generally solicitors take on the costs of clinical negligence cases by funding medical reports and expenses from their overdraft facility. This can have an adverse effect on the balance sheet especially in these times of austerity. So, what options are out there?
We provide a disbursement loan facility that doesn’t require you and your firm to provide a guarantee or service the loan. Great news to put to your partners at the next finance meeting! Our package combines insurance as well, so clients are fully protected from the slings and arrows of defendants. The loan element of our package has a simple interest rate of 15% per annum. Is this expensive?
To answer that question we have to decide what factors affect the price of money. Among others, the availability of money, lenders willingness to lend, loan period, security, credit history and general market conditions all feed into the rates we pay for money. Most lenders don’t understand or like litigation business because the borrower’s ability to pay is linked to winning a case which is inherently uncertain.
So what currently has been available to litigant clients to pay their disbursements?
Payday loans, ludicrously high interest rates and very short term loans, monthly payments required and fixed loan terms.
Personal loans, interest rates from around 5% and above, monthly payments required and fixed loan period. A client would also have to have a satisfactory credit history and maybe also provide security.
Credit cards, APR around 29% (rate may vary) and above, monthly payments required, compound interest and no fixed loan period.
These products are not suitable for litigants because no one knows how long their case is going to last, how much money is needed or indeed if they will win. This is why latterly most firms have seen the need to accept the disbursements cost burden on behalf of their clients. Working with our partners, QLP provides funding which relieves firms of this burden by lending money to clients through a regulated CCA. These loans are not serviced or secured, can run for five years, and monies are drawn down as and when needed. Interest is deferred and only paid if your client’s claim is successful. The disbursements including interest are insured so if the claim is lost the client has nothing to pay.
So what appears to be expensive can turn out to be ‘cheap’.
(There are alternative funding arrangements not mentioned in this article.)