In the past 15 years, the business of law has undergone a profound transformation, largely due to the rise and maturation of legal finance. From niche concept to indispensable tool, this funding mechanism has reshaped how firms and corporations navigate litigation complexities. As we mark this significant milestone, an independent study reveals the expanding role of legal finance in modern corporate strategy.

The Future of Legal Finance is Now: Empowering Businesses to Thrive Amidst Uncertainty

Redefining Risk Management Through Legal Finance

The evolution of legal finance has been nothing short of remarkable. Once viewed as a solution for underfunded litigants, it now serves as a strategic asset for businesses and law firms worldwide. Today, 82% of law firm lawyers report leveraging legal finance, compared to just 9% in 2012—a staggering ninefold increase. This surge underscores not only its growing awareness but also its critical role in managing financial risks associated with complex litigation.Escalating litigation costs have driven this demand. A partner from a leading global law firm noted, "Litigation expenses are spiraling out of control, especially during discovery." In response, innovative solutions like legal finance offer much-needed relief. Clients no longer wish to bear these burdens alone; instead, they prefer external funders to assume the risk, allowing them to focus on core business operations.

Expanding Beyond Traditional Boundaries

Initially, legal finance was seen primarily as a means to cover fees and expenses for high-value claims. However, its applications have broadened significantly. Today, it addresses a wider range of strategic needs, including duration risk management and working capital provision. Law firms and corporations are increasingly exploring portfolio financing, monetizations, and funded patent divestitures.An Am Law 50 firm partner highlighted, "As companies witness success, both law firms and corporations pursue more sophisticated transactions." Funders now bring deep expertise in structuring complex deals, such as creating special purpose vehicles for patent claimants. This evolution reflects a more nuanced understanding of both legal and financial intricacies, enabling tailored financing arrangements that align with client objectives.

Mainstream Acceptance and Positive Perception

Over eight in ten senior lawyers report a more favorable view of legal finance over the past decade and a half. Once met with skepticism, it is now widely regarded as a legitimate and valuable tool. Even large defense-side firms and well-known name-brand practices have embraced it. A partner at an AmLaw 100 firm observed, "Perceptions have shifted positively, with larger firms on the defense side showing greater interest."Initial concerns about frivolous claims have proven unfounded. Instead, funding provides validation that claims are meritorious. Clients, often aware of its benefits through direct interactions or peer insights, proactively raise the possibility of using legal finance. A Global 200 law firm counsel remarked, "Clients frequently approach us with this idea first, signaling its normalization."

Fueling Growth and Strategic Expansion

Legal finance has emerged as a powerful growth catalyst for law firms. Portfolio financing, in particular, enables firms to scale operations and diversify offerings. Traditionally defense-oriented practices are establishing plaintiff practices, benefiting from risk-sharing and case valuation expertise provided by legal finance partners.Industry examples underscore this trend. Kirkland & Ellis's investment in a legal finance-supported litigation practice has reshaped perceptions, while Willkie Farr's use of legal finance enhances private equity transactions. These cases illustrate how legal finance drives success, helping firms meet rising client demands and remain competitive in a challenging marketplace.

A Strategic Tool for Corporate Clients

Corporate clients are increasingly turning to legal finance for more than just filling funding gaps. They see it as a strategic tool to manage litigation risk and optimize resource allocation. CFOs, alongside GCs, recognize litigation as a revenue-generating asset, treating disputes similarly to other asset classes.A litigation boutique partner explained, "Corporations can spread litigation risk by sharing it with outside capital providers, improving financial efficiency." Companies prioritize broader business purposes, preferring to use outside funding for claims and allocate resources to core operations. This shift highlights the versatility and value of legal finance in today's corporate landscape.

Looking Ahead: Continued Growth and Innovation

Law firm lawyers foresee continued growth for legal finance in the coming years. As acceptance widens, its applications will expand, addressing a broader set of challenges. Continued professionalization and technology integration, particularly AI and data analytics, will enhance risk assessment and management capabilities.A partner from a litigation boutique predicted, "Legal finance will elevate the talent and aptitude of providers." Undoubtedly, legal finance will experience sustained growth and innovation, benefiting the business of law. As one partner put it, "We are in the second or third inning of legal finance," signaling an exciting future ahead.