What is pre-settlement funding?

By Michael Shemtoub, trial attorney, Beverly Law. Updated November 2026.

How a lawsuit cash advance works

The deal has the same shape under most of its names. You have a pending claim, usually with a lawyer working for a contingency fee. A funding company reviews the claim and, if it approves, pays you a lump sum. You sign a contract that gives the company a right to part of the money your case brings in. When the case settles or ends in a judgment, the company is paid from that money before you receive your share.

States that regulate the product describe it the same way. California’s Consumer Legal Funding Act calls it “a nonrecourse transaction in which a consumer legal funding company purchases” a contingent right to part of the proceeds of a legal claim (Cal. Bus. & Prof. Code § 6250(c), added by Stats. 2025, ch. 565). The Illinois statute states the central promise in plain words: “if no proceeds are obtained from the consumer’s legal claim, the consumer is not required to repay the company” (815 ILCS 121/5).

In practice the process usually runs in this order:

1. You apply, and the company asks your lawyer for information about the claim. A study of one large funder’s files found that funders gather police, hospital and insurance reports and look at the defendant’s insurance carrier and the scope of its coverage (Avraham & Sebok, 104 Cornell L. Rev. 1133, 1141, 1148 (2019)).
2. The company estimates what the case may be worth and decides whether to fund it and for how much.
3. You sign the contract. In several states your lawyer must sign a written acknowledgment as well, and without it the contract is void, as in Nevada (NRS 604C.350) and Kansas (2026 Kan. Sess. Laws ch. 130, sec. 3(d)-(e)).
4. The company sends the money.
5. When the case resolves, the company is paid from the recovery under the contract, and you receive what remains after attorney fees, case costs and liens.

What the money is for

The U.S. Government Accountability Office reviewed the market in 2022. It described consumer funding this way: “The funder provides a relatively small amount (typically under $10,000) to the plaintiff, who uses it for living expenses” (GAO-23-105210). GAO also found that the industry “is not specifically regulated under federal law,” which is why the rules come from the states.

Some statutes require that the money go to daily needs. Missouri’s law covers funding the consumer uses for personal or household needs, and the money may not pay attorney fees, filing costs or expert testimony (RSMo § 436.552). That line separates consumer funding from commercial litigation finance, where investors pay a business’s legal bills in exchange for a share of a large commercial case.

Why the money comes from a company instead of your lawyer

Many clients ask their own lawyer for help first, and ethics rules limit the answer. Washington’s rule bars a lawyer in pending litigation from advancing financial assistance beyond litigation expenses, and the official comment says lawyers may not subsidize lawsuits by making loans to clients for living expenses (Wash. RPC 1.8(e) and cmt. 10). California allows more: once hired, a lawyer may lend a client money “based on the client’s written promise to repay the loan,” after meeting the rules on conflicts and business dealings with clients (Cal. Rules of Prof. Conduct, rule 1.8.5(b)(2)). A loan like that must be paid back whether or not you win. Our page on whether your lawyer can give you money before settlement covers the rules state by state.

Other names for the same product

People search for this under many names, and state laws use their own labels:

• “Lawsuit loan” or “lawsuit cash advance” is common in advertising, although whether the deal counts as a loan depends on the state. See is a lawsuit cash advance a loan.
• “Consumer legal funding” is the term in the California and Illinois statutes.
• “Civil proceeding advance payment” is Indiana’s term (Indiana DFI advisory).
• “Litigation financing” is Tennessee’s term (Tenn. Code § 47-16-102).
• “Consumer lawsuit lending” is Arkansas’s term (Ark. Code § 4-57-109).
• “Settlement advance” and “pre-settlement advance” are common industry terms.

Pre-settlement funding is paid while the outcome is still uncertain. Post-settlement funding is paid after a settlement has been agreed and before the check arrives, so the company carries less risk. Courts and lawmakers sometimes treat the two differently, which our page on post-settlement funding explains.

What this means for you

Funding is a contract that trades part of your future recovery for cash today. Before you apply, it helps to know a few things:

• Ask your lawyer how long the case is likely to take, because time drives the price. Our page on what pre-settlement funding costs shows how the charges grow.
• Find your state in our state-by-state law table. Some states cap the charges, and some give you a few days to cancel.
• Read the section of the contract that covers what happens if you lose. “Non-recourse” has exceptions, covered on our page about what happens if you lose your case.
• Ask for the payoff in dollars at six-month steps, in writing, before you sign.

Common questions

Related pages

Cash advance on a lawsuit · Laws by state · Injury law FAQs

Important: This page is general information, not legal or medical advice, and reading it does not create an attorney-client relationship. Every case is different; talk to a lawyer about yours. Texas cases are handled by the firm’s Texas-licensed attorneys, Joyce Ondich and John Efstathiou. Last reviewed: November 7, 2026.