Non-Recourse vs. Recourse Funding: What's the Difference?
When litigation stretches into months or years, maintaining financial certainty becomes harder. Litigation affects people at all income levels. And when significant money is at stake, the choices you make about financing your case become critical.
Both non-recourse and recourse funding can provide you with the financing that aligns with your risk tolerance. It doesn’t matter if you’re involved in a complex real estate dispute, a serious personal injury case, or employment litigation. Knowing your funding options can make all the difference in protecting your financial stability.
Let’s break down the differences between non-recourse and recourse funding to see which one better fits your needs.
What is Legal Funding? A Brief Overview
Legal funding, often called pre-settlement or lawsuit funding, gives you access to cash while your case is still pending.
This is not a traditional loan. You are not borrowing against your credit or income. Instead, you receive an advance based on the potential value of your case.
For New Yorkers dealing with high-stakes litigation, this can be a lifeline. Maybe you are managing a multi-million dollar property dispute. Maybe an employment case has put your career on pause. Access to capital without taking on debt can be invaluable.
What is Non-Recourse Funding?
Non-recourse funding means that if you lose your case, you owe nothing. Non-recourse funding operates on contingency. The funder assumes the risk of an unfavorable verdict. They're betting on your case, and if that bet doesn't pay off, they absorb the loss.
US funding companies like Tribeca Lawsuit Loans offer non-recourse lawsuit funding with no monthly payments and no credit checks or income verification. For many plaintiffs, this feels like a safety net. You protect your downside while keeping pressure off your personal finances.
What is Recourse Funding?
With recourse funding, you must repay the advance regardless of how your case turns out. Win or lose, you're on the hook for repayment. This functions more like a traditional secured loan. The upside is that you typically get lower interest rates than non-recourse options because the lender faces less risk.
Recourse funding is more common in commercial litigation or when a plaintiff has significant assets and seeks lower-cost financing.
Key Differences: Non-Recourse vs. Recourse Funding
Here are the main differences between non-recourse vs. recourse funding:
Risk allocation: With non-recourse funding, the funder assumes the financial risk. With recourse funding, that risk stays with you.
Repayment requirement: Non-recourse funding is repaid only if you win your case. Recourse funding must be repaid regardless of the outcome.
Cost: Non-recourse funding usually comes with higher fees because the funder takes on more risk. Recourse funding often offers lower rates because lenders have less exposure.
Qualification criteria: Non-recourse funding is based primarily on the strength and merits of your case. Recourse funding focuses on your credit profile, assets, or personal guarantees.
The choice between these options depends on your risk tolerance, case strength, and financial position.
Which Option is Right for High-Stakes Litigation?
For most plaintiffs involved in personal injury, employment, or real estate litigation, non-recourse funding is the preferred option.
It eliminates downside risk while preserving your negotiating power. You can hold out for a fair settlement without worrying about repaying an advance if things don't go your way. That peace of mind matters when you're facing a well-funded opponent.
If you have strong collateral and want lower rates, recourse funding could save money, but only if you're certain of a favorable outcome. Most plaintiffs, however, value the protection that non-recourse provides.
Learn more about Tribeca and how non-recourse funding can support your litigation strategy without exposing you to additional financial risk.
Final Thoughts
Litigation is rarely convenient. Still, understanding your funding options ensures you negotiate from a position of strength, not desperation.
Non-recourse funding offers financial protection that recourse funding cannot. If your case doesn't succeed, you walk away without owing anything. That's a safety net worth having.
Just note that before accepting any funding offer, you should fully understand the terms. Know whether you're dealing with recourse or non-recourse funding, what the total repayment amount will be, and whether fees are capped.
An informed choice today can protect your financial position long after the case is over.