Best Factoring Companies for Structured Settlements

Personal injury claims often involve some form of structured settlement, especially in larger claims such as wrongful death or medical malpractice cases. These settlements are designed to provide injury victims or their families with regular payments as a way to protect their financial future. However, those receiving a structured settlement may find themselves in a position where they need an immediate lump sum of cash. This often leads recipients to ask whether they can sell their future payments for a lump sum.

Even though selling a structured settlement is an option, that process is not always a guarantee. Selling a structured settlement requires court approval and is subject to a judge’s discretion on whether or not the sale is in the seller’s best interest. Since attorneys are often asked for recommendations of companies that will buy a structured settlement, this guide provides a comprehensive review of the best factoring companies as well as the criteria that an attorney should review prior to making a recommendation to a client.

How Structured Settlement Factoring Works

When someone sells their structured settlement, they give up their right to future payments in exchange for an immediate lump sum. However, the buyer will apply a discount rate. This means that the lump sum you receive today is less than the total value of your future payments. In most cases, structured settlements are actually tied to annuity contracts with insurance companies. Buyers do not typically buy the entire annuity, but they actually buy your right to receive future payments.

The sale and purchase of structured settlements is governed by Structured Settlement Protection Acts at the state level. These state-specific laws are designed to protect settlement recipients from predatory buyers and deep discount rates. Most transactions are subject to court approval, and that is not always a given.

The discount rate that applies to the sale can have a big effect on whether a judge will approve it. Discount rates vary, and they often depend on:

• Whether payments have already started
• The riskiness of the transaction
• The insurance company that issued the annuity
• Interest rates and other market factors
• The age and health of the seller (in some cases)

Structured settlement factoring companies do not always evaluate these factors the same way, so you might find that purchase offers can vary widely from one buyer to the next. However, attorneys must be very careful when making recommendations to clients. Since these transactions are subject to such high scrutiny from the courts, your reputation could be tarnished if you refer clients to a factoring company that is not on the up and up.

Criteria To Use When Evaluating a Factoring Company

Before recommending a factoring company to a client, you should make sure you do your homework. You should only recommend reputable factoring companies with a proven track record. Some of the criteria you should evaluate include:

Track Record of Court Approval

Factoring companies with a proven track record of getting these transactions approved are typically operating in good faith. The process can vary from one state to the next, so a proven track record also shows that the company is familiar with state-specific rules and procedures. In some cases, the factoring company may even have familiarity with local judges. Court approval is a major hurdle that must be met, so choose a company that knows how to get it done.

Clear and Transparent Discount Rates

The discount rate plays a huge role in the amount of money that the client gets in their pocket. Look for companies that are completely transparent with what discount rate they are using. Some companies may offer lower discount rates, but they may include hidden fees and other costs. Recommend companies that offer competitive, all-in pricing.

Ethical Sales Practices

Avoid companies that try to use high-pressure sales tactics to force a quick sale. The client should fully understand the implications of the transaction, and they need sufficient information to make an informed decision. Some companies try to pressure clients into a quick and total sale, but that is not always the best option.

Proper Communication

If you are referring a factoring company to a client, that client might want your help during the transaction. Some factoring companies may be reluctant to communicate with an attorney because they know their practices may not be in the client’s best interest. Find a company that will openly communicate and coordinate with you throughout the process.

Best Factoring Companies For Structured Settlements

There are many companies that operate in the structured settlement space, but some are set apart from others because of their reputation in the industry. Several factoring companies are frequently recommended in the industry, including:

Strategic Capital

Strategic Capital is a consistent referral partner for attorneys because of their commitment to helping clients find the right solution. They will never attempt to force a client into a quick sale. Instead, the team at Strategic Capital will help the client evaluate all their options and will often recommend a partial sale that helps the client with their immediate cash needs while still preserving part of their financial future.

Lawyers are comfortable referring clients to Strategic Capital because of the reliable and predictable outcomes that the company produces. The company emphasizes client education, and they are thoroughly experienced in satisfying all the judicial scrutiny that accompanies these transactions.

J.G. Wentworth

J.G. Wentworth is one of the largest buyers of structured settlements in the country. The company has tremendous brand recognition and a long history in the business. With its large scale, J.G. Wentworth typically offers competitive pricing and thorough knowledge of state-specific rules and procedures. However, one drawback of such a large company is that you might not get the personalized service and guidance that you need. However, the company remains a strong referral partner for many attorneys throughout the United States.

Peachtree Financial Solutions

Clients looking for a quick and easy transaction often turn to Peachtree Financial Services. The company is often praised for their knowledgeable staff and the speed at which they can close a transaction. Some clients have reported high fees and discount rates, so attorneys should always ensure that the deal aligns with the client’s long-term financial goals and needs. Peachtree Financial Solutions is usually considered a solid referral partner with a consistent track record of getting court approval for their transactions.

Other Factoring Companies

As previously mentioned, there are many companies that operate in the structured settlement space. Many of these companies have strong reputations, and attorneys also frequently recommend:

• Novation Settlement Solutions
• RSL Funding
• Liberty Settlement Funding
• Stone Street Capital

Each company has different pricing models, so it is always helpful to get multiple offers before making a final decision.

Getting the Most for Your Structured Settlement

As a lawyer, you want to watch out for the best interest of your client. This means helping them get the most from the sale of their structured settlement – if they should even sell at all. The companies mentioned above all have solid reputations in the industry and are often considered to be some of the best. However, before referring a client to a factoring company (especially one not on this list), make sure you ask important questions, like:

• How many transactions have you completed in this state?
• How often are your petitions for sale denied?
• What is the discount rate you typically apply to a sale?
• How do you ensure the client fully understands the details of the transaction?
• Will you work with an attorney to coordinate the transaction?

In addition to helping a client choose a factoring company, you can also help clients consider all their options. Clients must be able to weigh their short-term financial needs with their long-term security and stability. Perhaps selling just a portion or percentage of their future payments makes more sense than selling their entire settlement.

Not only can attorneys recommend factoring companies, but they should also encourage their clients to obtain independent advice before selling their settlement. Financial professionals can evaluate the client’s overall financial picture to help them make a decision that serves their best interest. Without getting the proper help, a client could face long-term financial uncertainty because they sold their structured settlement without understanding all the implications.

Protect Your Clients and Your Reputation

When recommending a structured settlement factoring company, attorneys should prioritize those companies that follow ethical practices, utilize transparent pricing, and have a history of getting court approval for their transactions. Companies vary widely in their pricing structure and the way they treat their clients.

Attorneys who are seeking reliable referral options consistently send clients to companies like Strategic Capital because they focus on client education and working with the client to choose the best option for their situation. Not only does this help protect the client, but this also helps protect the attorney’s reputation as well. Before you send a client to a factoring company, make sure you know what questions to ask and avoid those companies that are not going to have your client’s best interest in mind.