Because consumer legal funding is non-recourse, the funding company's right to payment exists only against the proceeds of the claim. If the claim recovers nothing, there are no proceeds, and the company absorbs the loss. Your own agreement sets out the terms, so confirm this against it.
Where the risk actually sits
This is the feature that defines the product. California law describes consumer legal funding as a nonrecourse transaction in which the company purchases a contingent right to proceeds. Contingent means conditional on something happening.
A funding company that gets this wrong across enough cases goes out of business. That is the risk it is pricing for, and it is the reason the charge on a funding agreement is not comparable to a consumer loan rate.
What 'losing' includes
A defense verdict is the obvious case. But a claim can also produce nothing because the defendant has no reachable assets or coverage, or because the claim is dismissed.
A claim that resolves for less than expected is different. There, proceeds exist and the agreement governs how they are applied. That's a scenario worth asking about specifically before you sign.
What you should confirm in writing
Don't take this page's word for how your agreement works. Ask for the non-recourse language in the contract itself, read it, and have your attorney read it. If a funding company won't point you to that clause, that tells you something.
Talk to Green Light
Green Light Legal Funding, LLC is a California consumer legal funding company based in Beverly Hills, serving eligible personal injury plaintiffs with claims pending in California.
Call 310-303-1858 or request funding. There's no cost to ask and no obligation.
More on Pre-settlement funding in California.