Understanding debt finance in football: debt factoring and secured loans

This article is an abridged version of an article that was originally published in the Butterworths Journal of International Banking and Financial Law, You can read the full article here.

Football clubs operate in a highly competitive and financially demanding environment. To remain successful both on and off the pitch, clubs must invest heavily in player acquisitions, wages, infrastructure, and commercial development. While many clubs generate substantial income through broadcasting rights, sponsorships, and matchday revenues, these income streams are often insufficient to meet clubs’ funding needs. As a result, clubs often turn to external debt financing to bridge the gap between revenue and expenditure.

This article explores the mechanisms through which English football clubs access debt financing, focusing on two primary structures: debt factoring and secured loan facilities. It also examines the legal and regulatory frameworks that govern these transactions, the protections available to funders, and the evolving landscape of football finance.

Debt Factoring: Unlocking Future Revenues

Debt factoring is a financial arrangement that allows clubs to receive immediate cash by selling their rights to future income. This approach is particularly appealing in football due to the relatively predictable nature of certain revenue streams, such as broadcasting income, commercial sponsorships, and transfer fees. Funders are drawn to these transactions because of the low default rates and the fixed nature of the underlying receivables.

There are two main ways in which debt factoring transactions are structured. The first involves the legal assignment of receivables. In this model, the club sells its right to receive future payments to a funder, who then becomes the legal recipient of those payments. For example, if a club has sold a player and is due to receive transfer fees in instalments, it can assign those receivables to a funder. The buying club is then notified of the assignment and directed to make payments directly to the funder. Similarly, if the receivables relate to centrally distributed broadcasting income, such as the Premier League’s “Central Funds,” the league itself may be instructed to pay the funder directly, although this is typically limited to a defined period.

The second structure involves the use of promissory notes. This is more common in transactions involving transfer receivables. In such cases, the buying club issues a promissory note to the funder, agreeing to pay the amounts due under the transfer agreement. This creates a direct and unconditional obligation from the buying club to the funder, simplifying the enforcement process if payments are missed.

Debt factoring transactions can be structured on either a recourse or non-recourse basis. In a recourse arrangement, if the debtor fails to make a payment, the funder can seek repayment from the club that sold the receivable. In contrast, a non-recourse structure shifts the risk of non-payment entirely to the funder, unless the selling club has breached its obligations under the original agreement. Clubs generally prefer non-recourse arrangements because they allow them to remove the receivables from their balance sheets and eliminate associated credit risks.

However, these transactions are subject to strict regulatory oversight. Both the Premier League (EPL) and the English Football League (EFL) restrict the assignment of receivables to entities classified as “Financial Institutions.” These are typically UK-regulated deposit-taking institutions, although a limited number of non-UK institutions have been approved in recent years. Additionally, FIFA regulations prohibit third-party influence over clubs’ employment and transfer decisions, as well as third-party ownership of players’ economic rights. These rules must be carefully navigated when structuring debt factoring arrangements.

Secured Loan Facilities: Traditional Lending with a Football Twist

In addition to factoring, football clubs also access financing through secured loan facilities. These are more conventional in structure and resemble corporate loans, but they are tailored to the unique characteristics of football clubs and their assets.

When providing a secured loan, funders typically seek collateral in the form of both tangible and intangible assets. Tangible assets may include stadiums and training facilities, which can be secured through legal mortgages or charges. However, funders are often cautious about relying too heavily on stadiums as collateral. The value of a stadium is closely tied to its use as a football venue, and there may be legal or commercial restrictions that limit its alternative uses. Moreover, enforcing against a stadium can carry significant reputational risks.

Intangible assets are often more attractive as collateral. These include future revenue streams such as broadcasting and transfer receivables, commercial contracts, intellectual property, and even the economic rights associated with player contracts. These assets can be secured through legal assignments or charges. In cases where full control over the asset is not feasible, a floating charge may be used instead.

The EPL and EFL rules allow clubs to assign future entitlements to central funds as part of an all-assets security package, even to funders that are not classified as Financial Institutions. This provides clubs with greater flexibility in structuring their financing arrangements, particularly when seeking long-term funding for infrastructure projects or operational needs.

Loan facilities provided to football clubs are increasingly structured with longer maturity periods, typically ranging from three to five years. This reflects a growing appetite among clubs for financial stability and long-term planning. However, funders must account for the inherent volatility of football, particularly the risks associated with promotion and relegation. Loan agreements often include provisions that adjust repayment terms, interest rates, or collateral requirements in the event of a club’s change in league status.

Protecting the Funder’s Position

Given the financial and reputational risks involved, funders seek a range of protections when providing debt to football clubs. These protections are both contractual and regulatory in nature.

Contractually, funders require clubs to make a series of representations and warranties, including assurances about compliance with football regulations and the validity of the receivables being assigned. In debt factoring transactions, funders may also retain the right to reassign receivables to the selling club if the debtor fails to pay. This allows the club to pursue enforcement through football’s regulatory bodies, which may offer protections not available to third-party funders.

Conditions precedent to funding are also critical. These may include the disclosure of existing football creditors, the provision of payment instructions to debtor counterparties, and the submission of relevant documentation, such as transfer agreements and international transfer certificates.

The rules of the EPL and EFL provide additional layers of protection through their treatment of football creditors. These are entities to which clubs owe money, including other clubs, players, and certain service providers. Both leagues have the authority to deduct funds from central distributions and redirect them to football creditors in the event of non-payment.

In the EPL, this power applies in both insolvency and non-insolvency scenarios. For example, if a club fails to pay another club for a player transfer, the EPL can deduct the amount from the defaulting club’s central funds and pay it directly to the creditor. The EFL has similar powers, including the ability to redirect transfer receivables and distributions from its Pool Account.

However, there are important limitations. The EPL rules do not explicitly extend these protections to funders, meaning that funders must rely on reassignment rights to benefit indirectly. The EFL rules go further by explicitly excluding funders from football creditor protections. This creates a hierarchy in which football creditors are prioritized over funders, particularly in the case of broadcast receivables.

Financial Oversight and Monitoring

While not a direct form of protection, the financial monitoring imposed by football authorities provides funders with a degree of comfort. EPL and Championship clubs are required to submit audited financial statements and confirm that no overdue transfer payments exist as of specific dates. UEFA imposes even stricter requirements on clubs participating in European competitions, mandating that all overdue payables be settled three times per year.

These monitoring mechanisms are designed to promote fiscal responsibility and reduce the risk of default. They also provide funders with greater transparency into a club’s financial health, which can inform lending decisions and risk assessments.

Defaults and Enforcement

Despite the complexity of football finance, defaults are relatively rare, particularly in transactions involving reputable counterparties such as broadcasters or top-tier clubs. When defaults do occur, the initial step is typically a formal demand for payment. If the issue remains unresolved, the enforcement process depends on the nature of the transaction.

For domestic transfers, disputes are governed by the rules of the EPL, EFL, or the Football Association. These rules provide a structured claims process that may culminate in arbitration. For international transfers, FIFA regulations apply. While arbitration is a possible outcome, most disputes are resolved before reaching that stage, due to the reputational and operational risks involved.

The Road Ahead: Trends and Challenges

The football finance landscape is evolving rapidly, with several emerging trends likely to shape the future of debt funding in the sport.

One of the most significant developments is the introduction of a new independent football regulator in the UK, as proposed in the Football Governance Bill. This regulator is expected to increase oversight of club finances and may impose new restrictions on how clubs raise capital. While this could enhance financial stability, it may also limit access to certain types of funding.

Another concern is the slowing growth of broadcast revenues. The EPL’s most recent domestic rights deal saw only a modest increase in value, despite a significant rise in the number of televised matches. In other European leagues, such as France’s Ligue 1 and Italy’s Serie A, broadcast revenues have declined. This trend could reduce the value of receivables available for factoring and make funders more cautious.

Finally, the recent ruling by the European Court of Justice in the Diarra v FIFA case has introduced legal uncertainty. The court found that certain FIFA regulations restrict the free movement of workers and violate EU competition law. FIFA is expected to revise its rules in response, which could have far-reaching implications for the transfer market and, by extension, the debt factoring market.

Conclusion

Football clubs are under constant pressure to perform, both on the pitch and in the boardroom. As they seek to enhance their competitiveness and invest in long-term growth, debt financing will remain a vital tool. While the regulatory environment is becoming more complex and market conditions are shifting, clubs and funders alike continue to innovate. The emergence of new financial products, such as loans linked to the value of playing squads, reflects the adaptability of the sector. As long as clubs maintain strong revenue streams and funders remain confident in the underlying assets, the football finance market is likely to remain active, resilient, and dynamic.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.

© Farrer & Co LLP, June 2025