Question about loans (football ones, not financial)

[rez9000]

I’m struggling a little with the loans with obligation to buy phenomenon.

What’s the point of them? I can understand loans with an OPTION to buy, that’s basically testing the player out and if he (or she, of course) pans out, the club gets first refusal.

So what are the advantages are there for the buying club to loan a player and THEN buy him? Is it purely a case of we don’t want to (or can’t) pay for him now but will be able to later? Or are there other pluses too?

 

[Marty]

Without being a financial expert myself, I imagine it's all about balancing the books to pass FFP regulations. A January loan with an obligation to buy in the summer means there's a small loan fee in this financial year and moves the larger transaction to the next financial year.

 

['O Zio]

I always assumed it was just an FFP dodge and/or a way to spread out your costs because they usual pay a smaller loan fee up front then the rest at a later time

 

[rez9000]

Without being a financial expert myself, I imagine it's all about balancing the books to pass FFP regulations. A January loan with an obligation to buy in the summer means there's a small loan fee in this financial year and moves the larger transaction to the next financial year.

I always assumed it was just an FFP dodge and/or a way to spread out your costs because they usual pay a smaller loan fee up front then the rest at a later time

So no advantage except ‘buy now, pay later’ then?

 

[Yid-ol]

Say you know you have 100 million each window to spend, but spent say 80 million already buy you want player X who is valued at 50 million, you can agree to pay 20 million loan fee and then the other 30 when you know you will have funds available again.

 

[Marty]

So no advantage except ‘buy now, pay later’ then?

Pretty much.

You also use these types of deals to do some creative accounting around sell-on clauses. I know GLC was an option and not an obligation but doing his transfer the way we did screws PSG out of a fair chunk of money that Betis now get to keep instead.

 

[SpunkyBackpack]

Budgets have to be maintained, cashflow kept in check, accounting is complicated and the bubble could burst at an point. Plus there could be other time sensitive issues, wasnt GLC's agreement something to do with the fact if they sold him in the summer then PSG would be owed a higher sell on fee % than if sold 6 months later?

Then add into things all kinds of financial skulduggery and agent nonsense and it all adds up.

**edit**
Fucks sake Marty i was like 2 seconds slower than you. Made me look like a prize bellend there.

 

[Col_M]

Isn’t the Obligation often linked to conditions? Eg. Obligation to buy if Club secures not getting relegated etc. That way they aren’t lumbered with a player they cannot afford.

 

[thecook]

It's also an advantage to the player's parent club because if they want rid then it guarantees them future funds that they can then borrow against to buy a new player in.

 

[Hakkz]

Pretty much.

You also use these types of deals to do some creative accounting around sell-on clauses. I know GLC was an option and not an obligation but doing his transfer the way we did screws PSG out of a fair chunk of money that Betis now get to keep instead.

That's how PSG managed to get Neymar and Mbappe in the same window. Loan the latter and pay for him next year.

 

[aliyid]

Circumstances change with each scenario. I would be surprised if it was linked to FFP as the cost of the transfer is spread over the length of the contract i.e. if we spend £25m on a player and give him a five year contract then FFP counts as £5m/year (if I understand it correctly).

There are some cases like us with Lo Celso where the selling club has to give a % of the transfer fee to their previous club. By splitting the transfer into a loan fee and then a smaller transfer fee they can get away with giving away a smaller amount to the other club.

 

[BehindEnemyLines]

In the case of Lo Celso we used the loan with obligation to minimise the sell on fee paid to PSG (and consequently us). Pay 50% of the transfer as a loan fee (which PSG get none of), then the final 50% as the transfer fee a year later........the amount paid to PSG is halved.

 

[spursfan77]

Seems to be lots of different reasons to do it but I think it’s only really become more prevalent in England recently because of FFP. It’s been going on for longer on mainland Europe. We are just catching up.