Legal finance at 15: Research reveals what’s fueling growth and what’s next

Since its founding in October 2009, Burford has witnessed—and contributed to—significant changes in the business of law. Once niche, legal finance is now a critical tool for businesses and law firms across the globe, helping them make better financial and strategic decisions. To mark Burford’s 15th anniversary, we commissioned independent research to delve deeper into how legal finance is not only growing but also redefining the way businesses approach and manage risk.

Legal finance has grown significantly—and it will continue to do so

Over the past 15 years, legal finance has grown from a little-known concept to a critical resource for law firms and businesses navigating the complexities of modern litigation. Today, 82% of law firm lawyers report having used legal finance, compared to just 9% in 2012—a ninefold surge that underscores its rising awareness and adoption.

Increasing litigation costs remain a significant motivation for law firms and clients to better manage financial risks and complexities. “Costs are completely out of control,” a Global 200 law firm partner reported, highlighting how the escalating expenses of litigation, especially during discovery, drive demand for innovative solutions.

Yet legal finance is also now simply expected. As one senior lawyer explained, “Now, funders are indispensable to litigation. Clients don’t want to spend their own money and would rather pay a funder to assume the risk of pursuing the claim.” As the legal industry continues to grapple with rising costs and complexity, the role of legal finance will likely become even more entrenched in corporate and legal strategies.

Legal finance expands to broader, more sophisticated solutions

Initially, legal finance was seen as a solution primarily for clients without sufficient funds to pursue high-value claims; today, legal finance is used by law firms and businesses of all sizes. Use cases have expanded to meet a broader range of strategic needs, moving beyond just covering fees and expenses to managing duration risk and providing working capital.

Legal finance products have become more advanced to meet client needs through portfolio financing, monetizations and funded patent divestitures. An Am Law 50 firm partner explained, “Not many companies start with a portfolio, but as they see success, both law firms and corporations are pursuing portfolio transactions.” Client needs are also being more effectively addressed as the structure and capabilities of funders have evolved.

As one senior lawyer noted, “Fifteen years ago, legal finance companies were not as sophisticated in their analysis of legal claims and provided capital for a portion of the judgment, but now they are helping a patent claimant spin out the claim into a special purpose vehicle and offering a more complex and creative financing arrangement.” Today’s funders bring a deep understanding of legal and financial complexities. For example, funders are now structuring deals such as creating special purpose vehicles for patent claimants and providing tailored financing arrangements that align with client goals.

Legal finance is now perceived as mainstream

Over eight in ten senior lawyers surveyed reported a more positive perception of legal finance over the past 15 years. Law firm lawyers across the board see it as a legitimate and valuable tool for their firms and clients, with many—including large defense-side firms and well-known name-brand firms—now incorporating it into their practices.

Use of legal finance is particularly striking among firms that have traditionally focused on defense practices, which are increasingly using legal finance to support the building of risk-based plaintiff litigation practices. As a partner at an AmLaw 100 firm noted, “[The perception of legal finance] is much more positive, and larger firms on the defense side are more interested in it, with many using it. All of the name-brand firms use it. The perception by lawyers has changed positively.”

Importantly, initial objections have been dispelled. As a senior lawyer explained, “When[legal finance] was introduced, people thought it would result in the proliferation of frivolous claims, but the opposite has occurred, with funding providing validation that the claim is actually meritorious and strong rather than weak and illegitimate.”

This shift is further evidenced by how common and normalized legal finance has become. Clients, often aware of its advantages through direct interactions with funders or insights shared by peers, are now proactively raising the possibility of using legal finance. A counsel from a Global 200 law firm noted, “It’s no longer something we suggest to clients—they often come to us with the idea first.”

Law firms are embracing legal finance to fuel growth

Law firms are embracing legal finance as a strategic growth tool, leveraging it to expand into new practice areas and meet rising client demands. Portfolio financing, in particular, enables firms to scale their operations and diversify their offerings. Traditionally defense-oriented law firms are also using legal finance to establish plaintiff practices, as they welcome both legal finance partners’ risk-sharing and their expertise in valuing cases.

As one Am Law50 law firm partner noted, “More law firms are focused on portfolios and also use them for clients who need greater funding to pursue claims. As law firms fight for profitability, they see legal finance as a tool for growth.”

This evolution is underscored by industry examples that lawyers cited in the course of research interviews. They cited Kirkland & Ellis’s investment in a legal finance-supported litigation practice as reshaping perceptions of how legal finance can drive success, in addition to Willkie Farr’s use of legal finance to enhance private equity transactions. Such cases illustrate how legal finance is becoming an essential business development tool, helping firms respond to growing client demand for funding solutions and positioning them to remain competitive in an increasingly challenging marketplace.

Corporate clients are increasingly using legal finance

Law firm lawyers report that their corporate clients are increasingly turning to legal finance as more than just a solution for filling funding gaps. Instead, companies are using it as a strategic tool to manage litigation risk and optimize resource allocation.

Corporate clients interested in legal finance include CFOs as well as GCs. CFOs see legal finance as an opportunity to offload litigation expenses from the P&L, thereby improving financial efficiency. Beyond mitigating costs, businesses are beginning to recognize disputes as revenue-generating assets, treating them similarly to other asset classes to unlock new financial opportunities. 

As a partner at a litigation boutique explained, “Litigation is a bottom-line cost. If corporations can spread that risk by sharing it with an outside capital provider, CFOs want to explore that option, especially because corporations hate litigation expenses. They are much more open to it if they can get some or all of it covered by legal finance.”

Companies are using legal finance to prioritize broader businesses purposes. As a litigation boutique partner put it, “If a company has a claim on its books, it is happy to avoid financing it directly. A company knows that its prospects for success in litigation are contingent, so it is happy to use outside funding to pay for the claim and use its money for its core business.”

What law firm lawyers see ahead for legal finance

Law firm lawyers see continued growth for legal finance in the years ahead. As legal finance becomes more widely accepted, they believe its applications will expand even further, offering broader solutions for both law firms and corporations. In fact, 89% of law firm lawyers say a broader set of users will employ legal finance to solve a broader set of challenges over the next 15 years. This will likely include continued engagement by CFOs as they seek ways to optimize financial strategies and mitigate the rising costs of litigation.

Continued professionalization and technology development are also seen as likely. The integration of AI and data analytics will enhance the ability to assess and manage litigation risk, driving more sophisticated use of legal finance. A partner from a litigation boutique observed that as legal finance expands, “It will also elevate the talent and aptitude of the legal finance providers.”

Undoubtedly, legal finance will experience continued growth and innovation, to the benefit of the business of law. As one partner and practice group co-chair from an Am Law 200 firm explained, “[Legal finance’s] likely growth will be driven by availability and necessity, pushing it into new areas.”

It will be exciting to witness the next 15 years in legal finance. As a partner at a litigation boutique put it, “We are in the second or the third inning of legal finance.”

Reprinted with permission from the January 2025 edition of the New York Law Journal
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