What Do Litigation Funders Look For in a Case?

Understanding how litigation funders and legal funding works is essential before exploring specialized funding options for specific practice areas.

When a claimant or their solicitor approaches a litigation funder, the conversation can feel opaque — particularly if it is the first time they have sought third party litigation funding. What exactly are funders looking for? What makes a case attractive, and what is likely to give a funder pause?

This article sets out the principal criteria that litigation funders typically apply when assessing whether to fund a commercial claim. It is intended to be practical and direct: the aim is to help you understand how a funder thinks before you make contact, so that you can assess your own position clearly.

Why Funders Are Selective

Litigation funders deploy capital on a non-recourse basis. If a funded case is lost, the funder bears that loss — the claimant owes nothing in respect of the capital deployed. This means funders are making a commercial judgment on every case they take on, and they need to be confident that the expected return across their portfolio justifies the risk.

This does not mean funders only support cast-iron cases. Risk is inherent in litigation, and experienced funders understand that. What funders assess is whether the risk is proportionate and manageable — and whether the commercial case stacks up.

The Due Diligence Stages

A funder's assessment of a case typically moves through four stages. Understanding these stages helps you anticipate what will be asked of you and when.

1. Preliminary review (1–3 weeks). A first look at the case summary, key legal issues and headline economics. The funder decides whether the matter is worth investing diligence resource in.
2. Full due diligence (4–8 weeks). Detailed review of merits with counsel, interrogation of the quantum model, defendant solvency and enforceability analysis, and testing of the costs budget.
3. Investment committee. The funder's committee approves indicative terms, subject to any final conditions.
4. Funding commitment. Definitive documents are negotiated and executed, and capital becomes available to draw against the agreed budget.

Most funding applications are declined — usually for avoidable reasons. Sections below on red flags and getting your case funding-ready explain how to make sure yours is not one of them.

The Key Criteria Litigation Funders Apply

1. Legal Merits

The starting point for any funder is whether the claim has a reasonable prospect of success. This is not a binary assessment — there is no bright line at which a case automatically qualifies or fails. Funders form their own view of the legal issues, usually in consultation with the claimant's legal team or independent counsel. They are looking for a case that is legally coherent, factually supportable, and capable of being advanced in a credible way.

Cases with fundamental legal weaknesses, significant factual gaps, or reliance on untested legal arguments carry more risk and are harder to fund. Strong legal merits, supported by a clear analysis from competent solicitors or counsel, significantly improve the prospects of securing funding.

2. Claim Value and Quantum

Litigation funding is not economical for small claims. The funder's due diligence costs, ongoing management of the matter, and return expectations all require a minimum threshold of claim value. Most funders in the UK work with a minimum quantum, though this varies between providers.

It is important to note that funders assess quantum at two levels: the size of the claim as pleaded, and the likely recovery on a realistic assessment. Overstated claims that will not survive scrutiny are not attractive. A well-evidenced, conservatively assessed quantum is more compelling than a headline figure that cannot be substantiated.

3. The Ratio of Costs to Likely Recovery

Even a high-value claim may not be fundable if the legal costs required to pursue it are disproportionate to the expected return. Funders typically apply a target ratio between the anticipated total costs (including the funder's capital and any ATE insurance premium) and the expected net recovery. This is sometimes described as the funding multiple.

As a general principle, funders look for situations where the expected recovery comfortably exceeds the total cost of funding. Where that margin is tight, the risk of adverse developments — delays, increased costs, partial recovery — becomes harder to absorb.

4. Enforceability of Any Judgment

A successful judgment is only valuable if it can be enforced. Funders spend considerable time assessing whether the defendant has assets against which a judgment can be satisfied, where those assets are located, and how readily they can be recovered.

Common issues that affect enforceability include: defendants based in jurisdictions with limited treaty arrangements with the UK, defendants whose apparent assets are held through complex structures, and defendants showing signs of financial distress. These are not necessarily fatal to an application, but they require careful analysis and may affect the terms on which a funder is willing to proceed.

5. Quality of Legal Representation

Funders work with law firms, not around them. The quality of the legal team is a meaningful factor in a funder's assessment. A case handled by an experienced solicitor with a clear strategy and credible counsel is more attractive than one where the legal approach is uncertain or underpowered.

This is worth bearing in mind when structuring a funding application. If the legal team is strong, make that clear. If you are at a stage where you are still choosing your legal representation, a funder may be able to assist or make introductions.

6. The Stage of Proceedings

Funders consider applications at various stages — before proceedings are issued, during ongoing litigation, and at appeal. The stage of the case affects the remaining cost profile, the risks that have already been resolved, and the timeline to a likely outcome.

Pre-issue applications allow funders to shape the litigation strategy from an early stage. Applications in ongoing matters require the funder to assess both what has happened and what remains to be done. Appeals can present particular opportunities where a sound legal argument has not yet been fully tested.

7. Absence of Material Conflicts or Complications

Funders also look for structural clarity. Complications such as ownership disputes over the claim, conflicting third party interests, insolvency issues affecting the claimant, or potential challenges to the claimant's standing can complicate a funding arrangement and may need to be resolved before funding can be agreed.

Red Flags That Stop Funding

Some issues are difficult or impossible to work around, and will usually stop a funding application in its tracks:

• Quantum that cannot be substantiated on a realistic assessment.
• A defendant with no traceable assets in an enforceable jurisdiction.
• An unaffordable costs budget relative to realistic recoveries — a damages-to-cost ratio well below 4–5x.
• Fundamental gaps in the underlying evidence or missing key documents.
• Ownership disputes over the claim itself, or standing problems.
• Existing funding, security or fee arrangements that cannot be resolved.
• Unrealistic timeline or budget expectations from the claimant or legal team.

Identifying these issues honestly — and, where possible, addressing them before you approach a funder — dramatically improves the odds of a successful application.

How to Get Your Case Funding-Ready

A short, practical set of steps to take before you submit:

1. Write a five to ten page case summary. Facts, legal basis, quantum, defendant, stage and legal team — in that order.
2. Get an honest merits view. A written analysis from your instructed solicitor, or a counsel's note, is worth its weight in gold.
3. Build a realistic quantum model. Show the range, not just a headline. Explain the assumptions.
4. Prepare a stage-by-stage costs budget. Through to trial, not just to the next hearing. Include solicitors', counsel, experts, court fees and disbursements.
5. Run defendant solvency and enforcement analysis. Even a light-touch review is better than none.
6. Assemble the core documents. Pleadings, key contracts, correspondence, any existing advice — see our data room checklist for litigation funding.
7. Sign an NDA and introduce your legal team. Funders diligence the case with your solicitors — early access speeds the process.

Approaching a funder with these steps done — rather than starting them after first contact — is the single biggest factor in turning a possible funding into an actual funding commitment.

What Funders Are Not Necessarily Looking For

It is worth dispelling a common misconception: funders do not require certainty of outcome. Litigation is inherently uncertain, and no experienced funder expects guarantees. What they require is a rigorous, honest assessment of the claim's strengths and risks — not a presentation that smooths over difficulties.

Similarly, funders do not require the claimant to have exhausted all other options before approaching them. Many claimants seek funding from the outset as a deliberate strategic choice, rather than as a last resort. For a comparison of funding structures, see our guide on litigation funding vs CFAs and DBAs.

Preparing for a Funding Conversation

If you are considering approaching a litigation funder, it is worth having the following available at an early stage:

• A clear summary of the claim and the key legal issues
• An assessment of quantum, ideally prepared or reviewed by a solicitor
• Any existing legal advice, counsel's opinion, or pleadings
• Information about the defendant's financial position and assets
• A realistic estimate of the likely costs of pursuing the matter to resolution

The more clearly this information is presented, the more efficiently the funder can assess the case and respond meaningfully.

For more on what documentation funders typically request, see our guide on what documents litigation funders need.

To understand whether your own matter is likely to meet these criteria, you may find it useful to read our article on whether a claim is suitable for litigation funding.