How do football clubs use factoring to gain instant access to transfer fees?

Invoice financing, or factoring as it is often referred to, is commonly used by businesses to improve their cash flow. With invoice financing, rather than waiting for an invoice to be settled, a proportion of cash tied up in the invoice can be released by a factoring company as soon as the invoice is issued.

Say a company sells cars on finance. They sell you a BMW 3 Series. It is a £27,000 motor, but you pay a deposit of £5,000 and drive it away same day. You then agree to 48 monthly payments of £269 and a final an optional final payment of £12,088.

The dealership will end up earning receiving £30,000 for you, the buyer. But at this moment in time they only have £5,000 in their pocket. No where near enough for them to replace the car you have just bought from them, which would enable them to make the next sale.

So what the dealership will do is contact a factoring company. They will explain that they have £12,912 in monthly payments set to come from a buyer.

The factoring company will buy the debt off the dealership, minus a small percentage – say 10%.

So the dealership receives £22,500 (£25,000 minus the 10%) from the factoring company, as well as the £5,000 deposit from yourself – £27,500 in total.

As you make your £269 payments to the dealership, they in turn make the same payments to the factoring company. At the end of the finance deal, a final payment is made, or the car is returned to the dealership who then sell it on.

You get a car that you can afford upfront, by agreeing to pay on finance.
The dealership receives £27,500 (a little over the original asking price).
A factoring company makes £2,500.

Whilst the dealership might have “lost out” on £2,500 additional profit, using the factoring company meant that they got the on the road price of the car upfront, rather than waiting for 48 months.

This enables them to buy more cars. And in turn to sell more cars.

Without the factoring company, the dealership would not have the cash to purchase new cars, and continue running their business.

Say Arsenal are demanding £20m upfront for Lucas Torreira. Torino want to pay Arsenal £10m now, £5m next summer and £5m the summer after.

Arsenal can not complete a deal for Thomas Partey with £10m. They need the full £20m. So they enter into negotiations with Torino.

Instead of the deal being for £20m upfront, the two clubs agree that Torino pay £10m upfront, £6m in a year, and another £6m in 2 years. Torino paying an extra £2m to spread the fee over 3 summers.

“But Arsenal are still only receiving £10m this summer” you cry.

No. What Arsenal then do is contact a factoring company.

They inform the factoring company that they are owed £6m next on 31st July 2021 and another £6m on 31st July 2022.

The factoring company then buy the £12m debt for £10m.

Arsenal receive their £20m this summer (£10m from Torino, £10m from the factoring company) and then next summer, Torino pay Arsenal £6m, Arsenal in turn pay £6m to the factoring company.

And the process is repeated in 2022.

So Torino pay an extra £22m total to spread the transfer fee over 3 summer windows
Arsenal still receive 100% of what they wanted, allowing them to go and purchase Thomas Partey.
And the factoring company make a cool £2m.

Everyone is happy!

Ultimately, this means that if Arsenal sell players this summer, with fees paid in instalments, it is unlikely they will have to wait until next summer, or the summer after to access the agreement payments.

They will use a factoring company, which frees the money up straight away, allowing Arsenal to reinvest straight away.

Note: Often the factoring company will also collect the debt direct from the debtor. So Torino would pay the factoring company direct, rather than pay Arsenal who then pay the factoring company



4 thoughts on “How do football clubs use factoring to gain instant access to transfer fees?

  1. Eric C

    Arsenal will never use factoring in their transfers so this is a dumb suggestion, you need yo do better research instead of copying what others have written.


      1. Eric C

        Its not though is it tubs. You’ve read about factoring and tried to apply to Arsenal. If you had the most basic level of knowledge on this, you’d know Arsenal have never conducting a deal using factoring and in most cases its a process used by smaller clubs.

        You’re not an expert, you’ve just got internet access.


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