Many years ago, Arsene Wenger shared a view that loan deals will dominate the transfer market in the future.
His thinking was based on transfer fees spiraling, and the gap between the “haves” and the “have nots” growing even bigger. That clubs lower down the league, or in lesser leagues, would be unable to pay what the “bigger” selling club would want for their discared talent to make the deal worthwhile.
One of the driving factors of this opening was also the way clubs use amortisation in their accounts. It would not be worthwhile a club selling a player for less than their book value, and therefore having to show a loss in their accounts for selling a player.
Sides would actually be better off keeping a player for the duration of their contract and releasing them on a free (and therefore showing no accounting loss). Then during the duration of their contract, clubs will look to loan players out, offsetting 100% of the players salary as well as the amortisation cost for the year in a loan fee.
It is more affordable for a lesser team to pay a £5 or £6m loan fee, and cover the wages, than have to spend £30m on a player.
One step beyond this is the “loan with option / obligation to buy” which we are increasingly seeing.
Tottenham have used this in recent years when they looked to sign Dejan Kulusevski, Cristian Romero and Pedro Porro.
The bought them in on loan deals (one of which was a 2-year loan deal) with an option or obligation to buy once the loan period was over.
The loan with an obligation or option to buy is common practice in Italy, so it was no surprised that Spurs’ then Director of Football Fabio Paratici was utilising the tactic.
In the Profit and Sustainability Rules era, loans with obligations to buy allows clubs to recruit a player without a transfer fee hitting this years accounts. In turn, that gives them a year to sort out their finances, ensure their books are balanced ahead of the transfer and ensure they do not break the rules.
It also has the added benefit of allowing clubs to buy more players than they otherwise could afford.
If you can recruit player A on a loan with the obligation / option to buy, you can then pay a transfer fee on Play B, who you otherwise might not have been able to afford.
This tactic does have a downside as it means you need (if obligation) to spend the money the next season on a player you had this season. That in turn means yo have less money to spend next summer. You are basically buying two players this summer, instead of one this summer and one next.
Arsenal are operating in the opposite direction to Spurs.
Instead of kicking debt down the road by loaning in players that you need to pay for in the future, we are loaning out players with an obligation / option to buy. But what are the benefits of this to us?
Maximize the transfer fee
As it stands, we have no PSR concerns. Nor do we have to sell players to raise funds to make purchases. That puts us in a strong position when trying to maximise our transfer fees.
With many of those being loaned out having 2-3 years left on the contract, we are in no rush to sell this year. That means we can to loan with obligation to buy deals that are attractive for lower clubs, with us receiving the full fee we demand next summer.
Our flexibility ensures that we get the fee we want, without needed to drop our asking fee purely because the buying / loaning club can not afford them this summer
Were we not to work with clubs on loan with obligation to buy deals, they might either go elsewhere for the signings, or offer us less for the player to join permanently this summer.
I would rather £20m next summer for Reiss Nelson, then agree £15m this.
Maximize the transfer fee II
Many of those being loaned out have struggled for game time at Arsenal. A loan with an option to buy allows them to prove themselves and their value.
If the player performs well, the loaning club is likely to proceed with their option to buy. And that option is likely ore than what would be on the table this summer as a permenant transfer.
And if the player does not perform? Chances are we will still get whatever the fee was that we were being offered this summer.
Options to buy ensure we get the fee we want, based on what we think of the player if they were playing regularly.
Profit in future might be needed
PSR compliance is important when it comes to thinking about selling players.
Whilst we know this summer we are not at risk of breaching the rules, we do not know what position we will be in next.
By pushing the incoming transfer fee down the road, it ensures that any fee that comes in will be into the 2025/26 PSR accounts. This could offset, for example, a revenue drop due to lack of Champions League football.
On the face of it, doing loan deals might indicate to some that Edu is unable to sell players. And I do get that view.
But once you dig deeper, you realise the benefits for Arsenal in pushing incoming transfers down the road.
That income might be needed for a rainy day, and in allowing teams to loan the player first, we ensure we are maximizing the transfer fee in the future and maybe even increasing what would have been offered as a permanent transfer this summer.
These sort of loan deals are the norm in Italy. With PSR in its current state, expect more to happen in England!
Keenos
She Wore A Yellow Ribbon 
quite how Nelson’s fee would go up 5m with one year less on his contract is a mystery
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Because Leicester would basically be securing his signature for next year this summer, whilst he still has two years left
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