Litigation financing is providing money to a plaintiff in order to fund a lawsuit in exchange for a portion of the award (if any) recovered during a trial. While the money is often used directly to pay for legal expenses, it can also be used to pay for a plaintiff’s ongoing personal or business expenses during the lawsuit.
Most litigation financing is done through what’s known as “non-recourse” capital, which means that investors only receive money if the case is settled or wins at a trial.
Litigation financing is a relatively young concept in the US, and as you might expect in the context of a conservative industry like the law, not everyone is a fan. A common complaint is that while they are technically not loans, the terms (especially when a case drags on for a long time) mean a big chunk might be taken out of the award, especially relative to the amount initially advanced to the plaintiff.