Understanding the Differences Between Consumer, Commercial & Attorney Portfolio Litigation Funding

The legal funding industry has grown rapidly in recent years, offering innovative solutions to plaintiffs, law firms, and businesses navigating costly and complex legal battles. While “litigation finance” is often talked about as if it’s one single thing, there are actually three very different models:

• Consumer legal funding
• Commercial litigation financing
• Attorney portfolio financing

Each plays a distinct role, serves different clients, and is structured in its own way. Understanding these distinctions is critical for attorneys, clients, lawmakers, and legal professionals. Applying the same regulations to all three can cause unintended—and sometimes irreparable—harm, especially to the most vulnerable plaintiffs.

Consumer Legal Funding: Supporting Individual Plaintiffs

Consumer legal funding—sometimes called pre-settlement funding—is designed for individuals involved in personal injury or civil litigation. These are often people in financial crisis after an accident or injury: unable to work, facing mounting medical bills, and without access to traditional credit.

Unlike a bank loan, consumer legal funding approval isn’t based on credit score, employment history, or income. Instead, the funding decision focuses on the merits of the case—how strong it is, and the likelihood of recovery.

The money provided isn’t used to pay legal fees. Instead, it’s meant to cover essential living expenses like rent, utilities, groceries, or transportation. In other words, it helps plaintiffs stay afloat while they wait for their case to resolve.

Non-recourse protection:
If the plaintiff loses their case or the settlement is too small to cover the advance, they owe the funder nothing. This makes consumer legal funding fundamentally different from a loan, which must be repaid no matter the outcome.

Why it matters:
Without this safety net, many plaintiffs are forced to take the first lowball settlement offer they receive—simply because they can’t afford to keep fighting. Consumer legal funding allows them to hold out for a fair resolution.

Example:
A construction worker injured on the job is unable to work for months. While his case is strong, the defendant’s insurance company drags its feet. A consumer legal funding advance helps him cover rent and groceries so he can wait for a fair settlement instead of settling for pennies.

Commercial Litigation Financing: Powering High-Stakes Business Cases

Commercial litigation financing is a completely different arena. It serves businesses—from small enterprises to multinational corporations—pursuing claims like breach of contract, intellectual property disputes, fraud, antitrust violations, or international arbitration.

These cases are high-value, high-complexity, and often take years to resolve. The costs can be staggering: attorneys, expert witnesses, depositions, trial preparation, and discovery expenses can run into the millions.

Commercial litigation financing provides capital to fund the litigation itself in exchange for a share of any recovery.

Key differences from consumer legal funding:

• Size of funding: Often in the millions
• Structure: Customized agreements, often highly negotiated
• Due diligence: Extensive legal and financial review before funding
• Client: Corporate plaintiffs (and sometimes defendants)

Why companies use it:

1. To preserve cash flow and keep operating capital focused on core business needs.
2. To level the playing field against larger, better-funded opponents.

Example:
A small tech startup sues a major corporation for patent infringement. The defendant has deep pockets and a team of lawyers. Without commercial litigation funding, the startup would have to divert money from operations to pay legal costs—or abandon the claim entirely. With funding, they can see the case through.

Attorney Portfolio Financing: Strengthening Law Firms

Attorney portfolio financing addresses a unique challenge for contingency-fee law firms: cash flow.

Plaintiffs’ lawyers often take on cases without any upfront payment from the client, covering all expenses themselves, and only get paid if the case wins or settles. This can create serious financial strain—especially when cases take years to resolve.

Attorney portfolio financing allows law firms to leverage a group (portfolio) of ongoing cases as collateral for a loan or credit facility. Because repayment is tied to the outcome of multiple cases, the risk is spread out—resulting in better financing terms than if a single case were used as collateral.

How funds are used:

• Staffing and payroll
• Marketing and client acquisition
• Office expenses and technology upgrades
• Case costs (experts, filings, depositions)

Why it matters:
Portfolio financing gives law firms the stability to take on more cases, withstand long litigation timelines, and avoid financial bottlenecks that could limit their ability to serve clients.

Example:
A personal injury firm with 50 active contingency cases uses portfolio financing to hire additional staff and expand marketing efforts. This allows them to grow their caseload and better serve existing clients without waiting for settlements to come in.

Common Misconceptions

One of the biggest misconceptions is that consumer plaintiffs use litigation funding to pay legal fees. In reality, consumer legal funding is for living expenses only. Attorneys in these cases work on contingency, covering legal costs themselves.

Another misconception is that all litigation funding should be regulated the same way. In truth:

• Consumer legal funding protects vulnerable individuals during a legal battle.
• Commercial litigation funding helps businesses pursue costly but valid claims.
• Attorney portfolio financing supports the financial health of law firms serving contingency clients.

Applying a one-size-fits-all regulatory framework can harm the very people these funding models are designed to help.

‍

The Bottom Line

While all three funding models fall under the broad “litigation finance” umbrella, they serve different clients, needs, and purposes.

• Consumer legal funding ensures injured or financially struggling plaintiffs can survive the long wait for justice.
• Commercial litigation financing gives businesses the firepower to pursue valid claims without draining their operating capital.
• Attorney portfolio financing keeps contingency-fee law firms financially stable so they can continue to fight for clients.

Treating them as the same thing—whether in regulation, public discussion, or policy—misunderstands their purpose and risks limiting access to justice for those who need it most.

‍

Adapted from “Understanding the Differences Between Consumer, Commercial & Attorney Portfolio Litigation Funding” by Eric K. Schuller, originally published in The National Law Review.

‍

‍