When a commercial dispute arises, two questions demand immediate attention: how much will this cost, and how will you pay for it?
The answers shape everything that follows — from the legal strategy you pursue to the risks you take on. Get the funding model wrong, and you could find yourself locked into arrangements that eat into your recovery or limit your options when you need flexibility most.
This guide breaks down the funding options available for commercial disputes, explains who can realistically access each one, and helps you weigh up the trade-offs involved.
What Are Your Funding Options?
There are several ways to fund commercial litigation. Each comes with its own cost structure, risk profile, and implications for how you run your case.
Hourly Rate Agreements
The traditional approach. Your solicitor charges for each unit of time spent on your case at an agreed hourly rate. You pay as you go, regardless of outcome.
This gives you complete control over your case and means you keep 100% of any damages recovered. The downside is obvious: you carry all the financial risk, and costs can escalate quickly in complex disputes.
Conditional Fee Agreements (CFAs)
Under a CFA — often called a ‘no win, no fee’ agreement — you pay nothing if your claim fails. If you win, you pay your solicitor’s normal fees plus a ‘success fee’, typically calculated as a percentage uplift on costs.
A variation is the Discounted CFA, where you pay a reduced hourly rate during the case and a smaller uplift on success. This balances risk between you and your solicitor.
Damages-Based Agreements (DBAs)
With a DBA, your solicitor receives a percentage of the damages you recover — typically capped at 50% for commercial claims. If you recover nothing, you pay nothing.
DBAs align your solicitor’s interests directly with yours: the more you recover, the more they earn. However, this also means giving up a significant share of your winnings.
Third-Party Litigation Funding
An external funder — typically a specialist investment firm — pays some or all of your legal costs in exchange for a share of your damages if you succeed.
This can be attractive for high-value claims where you lack the cash flow to fund litigation yourself. But funders are selective: they will scrutinise your case carefully before committing, and their share of the proceeds can be substantial.
Legal Expenses Insurance
If you have a legal expenses insurance policy in place — often bundled with business insurance — your insurer may cover the costs of litigation, subject to policy limits and conditions.
This is worth checking early. Many business owners don’t realise they have this cover until a dispute arises.
Which Options Work for Claimants vs Defendants?
Here’s the reality: these funding options are not equally available to everyone.
CFAs, DBAs, and third-party funding all depend on the prospect of recovering damages from the other side. That works for claimants pursuing a claim. It rarely works for defendants, whose objective is to avoid liability — not to win money.
If you are defending a claim and don’t have legal expenses insurance in place, you will almost certainly need to fund your defence on an hourly rate basis.
The exception is where you have a strong counterclaim worth pursuing. In that scenario, alternative funding may become viable — but the funder or solicitor will assess the counterclaim on its own merits.
How to Choose the Right Funding Model
Choosing how to fund your dispute is a strategic decision, not just a financial one. Several factors should influence your thinking.
The value of your claim. High-value disputes are more likely to attract third-party funding or CFA arrangements. For lower-value claims, the economics may not stack up.
The strength of your case. Solicitors and funders will only share your risk if they believe you are likely to win. A case with obvious weaknesses will struggle to secure alternative funding.
Your cash flow and balance sheet. Can your business absorb ongoing legal costs without affecting operations? If not, shifting risk to a funder or solicitor may be essential — even if it costs more in the long run.
How much control you want to retain. When you bring in a funder or agree to a CFA, you acquire partners with their own views on strategy, settlement, and risk. Their interests may not always align perfectly with yours.
Your appetite for risk. Are you comfortable with the possibility of paying significant legal fees if the case doesn’t go your way? Or would you rather cap your downside, even if it means sharing your upside?
Your strategic objectives. Sometimes the goal isn’t maximum recovery — it’s sending a message, protecting a relationship, or resolving the matter quickly. Your funding choice should support your broader aims.
One point to be clear on: the decision to fund a case through a CFA, DBA, or third-party arrangement is not yours alone. These models require someone else — your solicitor or an external funder — to accept a share of the risk. They will assess your case from their own perspective before agreeing to take it on.
The Trade-Off: Risk vs Reward
Alternative funding arrangements — CFAs, DBAs, and third-party funding — share a common benefit: they reduce your upfront exposure to legal costs. But that protection comes at a price.
If your claim succeeds, you will keep less of your recovery. Success fees under CFAs are not recoverable from your opponent; they come out of your damages. DBAs and funding agreements work the same way — you are sharing the fruits of your victory with the people who helped you get there.
You also give up some autonomy. Funders and solicitors with skin in the game will have views on how the case should be run, when to settle, and what risks are acceptable. Managing those relationships becomes part of managing the dispute.
Managing the Risk of Adverse Costs
Win or lose, there is another cost to consider: what happens if you have to pay your opponent’s legal fees?
After the Event (ATE) insurance can protect you against this risk. If your claim fails, the insurer covers your opponent’s costs up to the policy limit. The premium is typically payable only if you win — meaning it becomes another deduction from your recovery.
In theory, a strong case might attract CFA or DBA funding and ATE insurance. In practice, you need to do the maths carefully. Layer up too many costs — success fees, funder shares, ATE premiums — and you could win your case but walk away with surprisingly little.
How Our Commercial Litigation Solicitors Can Help
Funding is not just a legal decision — it is a strategic business decision. Getting it right means understanding your options, weighing the trade-offs honestly, and choosing an approach that supports your commercial objectives.
We discuss funding with every client at the earliest opportunity. We will help you understand which options are realistically available for your dispute, what each would cost in practice, and how they would affect your control over the case and your eventual recovery.
Where alternative funding arrangements are appropriate, we will work with you to put them in place. Where they are not, we will be upfront about that too.
To get in touch please fill out the form below, alternatively you can call Prosperity Law on
0161 667 3686
About the Author
Andrew Farrell is the Office Managing Partner and leads the Manchester litigation team. A solicitor since 1998 (SRA ID: 42723), he is an experienced commercial litigator handling a wide variety of business disputes, including professional negligence, breaches of contract, directors’ duties, shareholders’ rights, sale and supply of goods and services, construction disputes and fraud.
Andrew has represented clients in court proceedings up to and including the Supreme Court, but is also a strong advocate for alternative dispute resolution — particularly mediation — to achieve commercial, cost-effective solutions.
