Player can borrow up to 50% of the gross value of a contract for any period between 12 and 36 months with a minimum advance of £500,000. The period of the loan facility matures in line with the player contract.
Pricing is determined by discounting future income flows from player wages, factoring in various costs, risks and a service fee. The present value that is determined becomes payable as a lump sum to the client in a tax neutral manner. Repayments by clients will be fixed for the duration of the loan agreement.
The loan is not to be used for lifestyle purposes and SportsCredit will implement tight parameters surrounding how and where capital is deployed.
Player Scenario:
Player is on £1,500,000 Basic Wage per annum with 3 year contract outstanding with a Football club. Weekly Net take home pay is £14,204. He seeks £1m advance on existing contract to buy an investment property.
Client looking to purchase a new investment property in the UK with an asking price of £1,000,000 that generates a 6% Gross return on investment for the first 3 years.
Solution:
Client uses SC to fund 100% of the property purchase (excluding ancillary costs). Minimum break even return required from investment property is 3.1% (net) to maintain his monthly net take home pay.
Benefits of Using SportsCredit:
- Player gets advance to own property outright immediately
- Advance does not require client to use existing cash savings for deposit
- No mortgage means lower exposure to future changes in interest rates and income generated from asset
- SC advance provides greater purchasing power for potential property acquisition
- Player only requires a minimum 3.1% net return on investment to not compromise his net take home pay
- No ‘benefit in kind’ issues for the club
- Within FA regulations
For illustrative purposes only:
Profile of loan re-payment structure to accelerate £1,000,000 from player wages
| Player annual contract: | £1,500,000 |
| Advance required: | £1,000,0007 |
| Facility period: | 3 years |
| Player monthly repayments: | £29,7048 |
| % net player contract assigned to SC as security: | 48.26% |
| Total payments to SC (over 3 years): | £1,069,3769 |
Net income comparison for player over contract term after taking out SportsCredit:
|
|
Existing contract
|
SC proposal10
|
|---|---|---|
| Advance: | N/A | £976,47411 |
| Year 1: | £738,620 | £412,432 |
| Year 2: | £738,620 | £413,371 |
| Year 3: | £738,620 | £414,338 |
| Total net income: | £2,215,860 | £2,216,615 |
| Net average monthly income: | £61,552 | £61,573 |
- 7 Advances are secured against a portion of the player’s contract which is assigned to funders.
- 8 Payments are received directly from the employer under authority from the player
- 9 APR 6% (including SC fee, excluding legal cost)
- 10 All investment return assumptions have been included in proposal. A minimum of 3.1% (net) break-even investment return is required over 3 years for player net take home pay to be neutral.
- 11 Advances are net of SC fees & insurance costs (£23,526.00)