How this Charlotte-based tech platform looks to change funding for small law firms
Jul 24, 2019, 7:00am EDT
Cheryl Kaufman is a Charlotte-based attorney who saw the need for better funding options for small law firms. She tapped into her entrepreneurial spirit to create a solution.
Kaufman's latest technology platform, Fundafi, is how she's hoping to shake up the industry. Fundafi offers customized funding options for small practices based on their individual cash flow. Fundafi leverages data to determine the best plan to match each client's needs.
Fundafi is the technology-driven, client-facing arm of capital provider Alliance Legal Solutions, which Kaufman founded in 2011. Launching Alliance was a slow process, Kaufman explained, as it began as a handson operation. Kaufman and her team developed the technology side over a period of years.
The platform assesses case value and uses those future fees as collateral for financing.
"I noticed law firms were not able to make choices for themselves like you'd expect from a regular business," Kaufman said. "I understood that, really, it was a cash-flow problem."
Although seemingly glamorous, the life of a new attorney can actually be plagued with student debt and capital constraints. Starting one's own practice is an uphill battle. Traditional lenders don't always see the value in investing in a small firm, and attorneys are not allowed to draw money from outside investors.
And lawyers aren't bringing in the same amount of income from week to week. Besides fixed operating costs, they also have to consider varying expenses, including trial-related costs.
"From the outside looking in, it looks like an amazing opportunity to run your made-for-life kind of business, but increasingly, it's becoming more and more challenging to run a profitable business," Kaufman said. "It doesn't work the same as a retail business or something where revenue is more in sync."
Fundafi is about putting the control back into the business owner's hands, she said.
The platform shares data-driven insight with clients, so they can also see how their payment cycle works.
"We are able to tether the amount that they can spend with what they're earning and how they're earning," Kaufman said. "It takes a lot of stress off of these people, these small business owners, and it helps them increase their revenue. It helps them to really focus on the clients better because they're not trying to solve business problems that were heretofore unsolvable."
Launching Fundafi allows Alliance Legal to scale its operations and work with customers more efficiently. Kaufman said her business serves hundreds of clients nationwide.
"We just see the need so great we're trying to figure out how to jump in and be able to do more," Kaufman said.
Charlotte Business Journal