Lawsuit financing can be all the rage in some “cash flow” circles and can seem confusing.

But it’s actually very simple: Plaintiffs in lawsuits need cash to pay their bills. They hope to win your lawsuit, but they need cash to get ahead in the meantime.

If you are in this business, you provide cash to these plaintiffs. If they win the lawsuit, your attorneys will give you the cash you advanced to the plaintiffs, plus a profit. If they lose their demand then you get zip.

There are numerous cash flow businesses including factoring, mortgage brokerage, and equipment leasing. Lawsuit financing is another cash flow business, and many of the usual suspects who run a business will too.

But there are differences.

The lawsuit financing business requires you to learn how to evaluate winning lawsuits. If you are investing your own money, it is best to make sure you know what you are doing. You have to judge the responsibility. You have to know what the damages are. You have to know what the other party is likely to do in court. And you need to know how much your case will eventually win.

Also, the skill set for factoring or leasing is different. Lawsuit financing requires that you build trust among personal injury attorneys. You have to speak their language. You have to convince them that you are knowledgeable and in business for the long haul.

There are investors who will back you if you are in this business, but they want to have confidence in you. All in all, it is a business that is best learned from someone who is already doing it, who has done it for many years, and who can teach you how it works.

With that said, I hope this little-known business explodes for years to come. There are approximately 16 million civil actions filed in state courts alone each year. And of them, maybe two million will go through the court.

Behind every demand there is a plaintiff. And behind every plaintiff there is often a stream of urgent bills and crushing living expenses. These people may have physical injuries to deal with. Meanwhile, the landlord wants the rent and the children need a ride to school.

So it is a business that you can feel good about if you decide to get involved. You help people when they are depressed. And earn money. What could be better?