Although a number of South African law firms have shifted to online consulting solutions, many are under financial strain due to the current delays and limitations at the courts, deeds office, Road Accident Fund and other legal bodies. Only urgent matters are currently being heard with delays in proceedings impeding billing hours and payment for many firms.
Changing rules, misinformation and uncertainty are rife with the widespread economic downturn causing a knock-on effect for law firms whose clients are under equal financial pressure. Many law firms need access to capital to get them through this period but are being turned away from banks because blanket loan criteria do not cater for the business of law.
Specialist financier, Taurus Capital, has created an alternative funding solution for South African law firms. It has built a R300 million capital pool which is exclusively available to the legal fraternity.
Says Elad Smadja, CEO of Taurus Capital, “We understand the inner workings of all types of law firms because our business was built on an appreciation of the commercial intricacies applicable to this sector. This allows us to consider value which traditional lenders overlook. Our solutions are tailored to each firm’s needs, with facilities from R250,000 to R30 million available to firms ranging in size from boutique to large multi-partner firms.”
Unlike traditional lenders, Taurus Capital assigns value to intangible assets such as book debts, mandate and fee agreements, invoices, court orders and taxed bills of costs. As experts in the business of law, they recognise that law firm income is cyclical and therefore match repayment expectations with the cashflow cycles of the firms they partner with.
“While our funding provides working capital to sustain a law firm during periods of economic contraction, it is also used to cover acquisition and disbursement costs to take on matters. Funding allows firms to pursue growth opportunities for expansion and succession or to meet seasonal requirements like tax and bonuses,” says Smadja.
Law firms can apply for funding to use only when required as an “insurance policy against the unknown” which is valuable given that uncertainty for legal practices is unlikely to dissipate in the immediate future. Much like a pre-approved bond for property buyers, a Taurus pre-approved loan is a non-binding funding solution that legal practices can use – and pay for – only if required.
Capital is available within 24 hours upon receipt of a signed loan agreement. The application process begins with a consultation process with a Taurus Capital executive to understand the nature of the firm and its specific financial requirements. Key financial documents are submitted as well as applicable court orders, fee agreements, invoices, and book debts. These are used by Taurus Capital’s team of legal and financial experts to conduct a financial analysis and develop bespoke solutions for each client.
“In contrast to standardised approaches to funding, we appreciate the unpredictable, lengthy and illiquid nature of these legal businesses on account of our exclusive focus on this sector. The way we see it, we enter into long-term partnerships with our clients that usually extends well beyond the provision of finance,” says Smadja.