Why would a pre-settlement loan be denied?

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

How often requests are turned down

Denials are common, and they say more about the company’s risk than about you. In a study of one large funder’s records, law professors Ronen Avraham and Anthony Sebok found that 52% of cases were not funded, and that about 60% of those were “denied outright” without going through the funder’s full underwriting (104 Cornell L. Rev. 1133, 1145-47 (2019)). The rest were reviewed in full and then not approved.

We did not find a breakdown of denials by reason in that study or in the U.S. Government Accountability Office report. So this page describes what funders look at, not the odds that any one factor will sink your request.

Fault: is the other side’s liability clear?

GAO reported that consumer funders “evaluate certain factors before deciding whether to provide funding,” starting with “whether the defendant’s liability for a plaintiff’s injuries has been established” (GAO-23-105210, p. 14). Avraham and Sebok note, citing earlier research, that funders deciding whether to reject an application focus on basic information about the lawsuit and “the strength of the consumer’s case” (p. 1166 n.62).

To judge fault, the company in their study could obtain “police, hospital, and insurance reports on the incident” (p. 1141). When the other side denies responsibility, blames you, or the record is thin, a funder has less to count on, and that is one of the most direct routes to a no.

Insurance: is there money to collect?

The second factor GAO names is “whether the defendant has insurance.” A strong case against someone with a small policy and no other assets may still produce a small recovery, and a funder sizes its offer to what it expects to collect. That is why a request can be denied, or approved for less than you asked, even when the injury is serious. Our page on how much you can get explains how funders size advances.

Where the case stands, and how long it may run

In the Avraham and Sebok data, the median client first contacted the funder 308 days after the accident (p. 1148). A claim that is very new may not yet have the records a funder wants, such as a police report, treatment records or an insurer’s position on fault.

A case that may run for years raises a different problem, because several states stop the charges after a set time. California’s limit is 36 months from the funding date (Bus. & Prof. Code 6250), and Illinois stops charges 42 months after funding (815 ILCS 121/25). A long expected timeline can make a case less attractive to a funder in those states.

Your lawyer’s part

In several states the contract cannot exist without your lawyer. California requires the retained attorney’s written acknowledgment and makes the contract void without it (Bus. & Prof. Code 6251(c)-(d)). Illinois calls a contract without the acknowledgment “null and void” (815 ILCS 121/10(c)), and New York’s 2026 text uses the same words (A.9442, sec. 1002).

Even where no statute requires it, the funder usually needs your lawyer’s file. Avraham and Sebok found that “lawyers’ experiences” with funding “are correlated with the likelihood that their clients will have their cases approved” (p. 1171). Our page on what happens if your lawyer says no covers that situation.

Liens, earlier advances and bankruptcy

A funder is paid after others who have a claim on your settlement, so it looks for them. The company in the study sought “details concerning any liens on an award” and whether the plaintiff “has ever filed for bankruptcy” (p. 1141). Medical liens, Medicare and child support can take a large share before a funder sees anything; see funding and medical liens.

An earlier advance matters too. California bars a company from funding a consumer whose proceeds were already assigned unless the earlier assignment is first satisfied (section 6254(a)).

State laws that can stop a deal

Some denials have nothing to do with the merits of the case. The law in your state, or the type of claim, can keep a company from funding it at all.

Our state law table has the rules for each state, and who qualifies for pre-settlement funding explains the residency and claim-type rules in more detail. For comp claims, see the workers’ compensation page.

What this means for you

• Ask the company to state the reason for the denial in writing.
• Ask your lawyer whether something the company wanted, such as a police report or medical records, is still missing.
• If the reason was liability or insurance, ask your lawyer whether that may change as the case develops.
• If the reason was your state’s law or the type of claim, applying to another company will likely meet the same rule.
• Look at the alternatives to pre-settlement funding while you wait.

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.