The cost of borrowing against your case inventory has roughly doubled from where it sat at the start of the decade, and the lenders who survived the last two years are asking harder questions before they wire a dollar. If you ran a portfolio facility in 2021 at a blended cost in the low double digits, the renewal quote you are looking at now probably starts with a 2 and comes with covenants you did not have before.
That repricing is not happening in a vacuum. Base rates stayed raise longer than most funders modeled, several high-profile single-case bets went to zero, and the institutional money that flooded into the asset class chasing uncorrelated returns has gotten selective. For a working plaintiff firm carrying advertising spend, expert costs, and a payroll against settlements that land 18 to 36 months out, the terms of that capital now drive more of your economics than your settlement multiples do.
What capital actually costs right now
Pricing splits sharply by what you are financing. Portfolio facilities secured against a diversified book of cases — the structure most established PI firms use — are clearing in a range that, after fees, draws, and the way returns compound on undrawn-then-drawn balances, lands an effective annual cost in the high teens to mid-20s for firms with a track record. Single-case finance, where the funder is betting on one outcome, prices far higher because there is no diversification to absorb a loss; multiples of 2x to 4x on deployed capital are common, and on a long-duration matter that translates to an internal rate that would make a hard-money lender blush.
The headline number is rarely the number that matters. Watch the deployment fee charged at close, the commitment fee on the undrawn line, the priority of the funder's return in the waterfall, and whether returns accrue on a compounding or simple basis. A facility quoted at a modest spread over a base rate can carry an effective cost double the quoted figure once a 2 to 3 percent annual commitment fee on an underused line and a senior position in recoveries are factored in. Model the all-in cost against your realistic case duration, not the funder's optimistic one.
Who is still writing checks
The lender pool has thinned and stratified. At the top, a handful of institutional funders backed by sovereign wealth, pension, and endowment money still write large portfolio facilities, but they have raised minimum deal sizes and now prefer firms with eight-figure case books and audited financials. Below them, specialty litigation-finance shops and family offices fill the mid-market, often with faster underwriting but tighter advance rates. At the retail end, consumer pre-settlement funding companies continue to advance against individual clients' claims, though that money is the most expensive in the chain and increasingly draws regulatory attention.
A meaningful share of capital has also migrated into law-firm ownership structures. The management-services-organization model — where outside investors take an economic interest in a firm's revenue through a separately owned services entity rather than a direct equity stake — has scaled into the billions, a shift we covered when SCOTUS severed the Roundup warning claims and MSO deals crossed the billion-dollar mark. For firms weighing that path, the trade is permanent participation in your upside in exchange for capital that does not sit on your balance sheet as debt. It is a different animal than a revolving facility, and it does not unwind cleanly.
The structural shift away from single-case bets
Two or three years ago a funder would underwrite one big mass-tort position and live with the binary outcome. The losses from that approach — including bets tied to inventories that evaporated on preemption and warning-claim rulings — have pushed the market decisively toward diversified portfolio structures and cross-collateralization. Funders now want exposure across multiple case types and resolution timelines so that one adverse appellate decision does not sink the facility.
That has direct consequences for how you pitch a deal. A book concentrated in a single MDL or a single theory of liability is now a red flag to underwriters, not a selling point. The repricing of mass-tort risk after rulings like the SCOTUS FIFRA preemption decision wiping out glyphosate failure-to-warn claims taught funders that a favorable bellwether is not a floor. Even a strong result — the kind of number that came out of the MDL-3047 social media addiction bellwether — gets discounted heavily for appeal risk and collection timeline. Diversification across uncorrelated case types is what gets a facility to close at a workable rate.
California's regulatory backdrop
California remains comparatively friendly ground for litigation finance, but the friendliness is doctrinal, not unconditional, and a few rules govern how you structure these arrangements.
The most important constraint is fee sharing. California Rule of Professional Conduct 5.4 prohibits a lawyer from sharing legal fees with a nonlawyer and bars nonlawyer ownership of a law practice. A financing arrangement that gives the funder a direct cut of fees, or effective control over case decisions, runs straight into that rule. This is precisely why the MSO structures route investor returns through a separate services entity rather than the fee itself, and why the documentation on any portfolio deal needs to keep the funder out of settlement authority and case strategy. Provisions purporting to give a lender a say in whether you settle are not just bad practice; they invite a disqualification fight and an ethics complaint.
On the question of whether these advances are usurious, California's usury limits under Article XV of the state Constitution apply to loans, and a genuinely non-recourse advance — one the funder loses entirely if the case fails — is generally treated as something other than a loan because repayment is contingent rather than absolute. The doctrine matters in your paperwork: the further a deal drifts toward guaranteed repayment regardless of outcome, the more it starts to look like a loan that has to live within the rate ceiling. As for the old common-law prohibitions on champerty and maintenance that still constrain funding in some jurisdictions, California has long declined to treat them as a bar, which is a large part of why the state is a center of gravity for this capital.
How to negotiate from the firm side
Treat the term sheet the way you would treat a defense settlement offer — as an opening position, not a fixed price. The single most valuable term to fight for is your retained control over settlement decisions; never trade it, regardless of the rate concession offered. After that, push on the priority of recoveries. A funder who insists on being paid in full before you recover a dollar of your own contingency fee is shifting all of the timing risk onto you.
Watch the cross-default and acceleration language in any portfolio facility. A clause that lets the funder call the whole line because a few cases underperformed can turn a manageable book into a forced fire-sale of your inventory. Negotiate cure periods, baskets for permitted losses, and a clear definition of what counts as a default event. And get a real lawyer who does not work the cases to paper the deal — the discount you get from doing it yourself is not worth what a buried covenant costs.
Where this leaves the working firm
Capital is available, but it is no longer cheap or patient, and the firms getting the best terms are the ones that look like diversified, professionally managed businesses rather than a single big bet waiting to pay off. The repricing is real, but so is the discipline it forces: a firm that knows its true case durations, its realistic resolution values, and its all-in cost of capital is in a far stronger negotiating seat than one chasing growth on borrowed money it has not modeled. Price the money honestly, keep the funder out of your settlement decisions, and the capital does what it is supposed to do.