Why are player loans becoming increasingly popular in the world of football? The good, the bad and the ugly.

Why are player loans becoming increasingly popular in the world of football? The good, the bad and the ugly.

Brief Background: 

In the last 3 decades, the total percentage of loaning players has risen from a mere 6% to 29% of all transfers. That is a significant increase considering the drastic upsurge in the total number of transfers. 

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The loaning of high-profile players is becoming more common with every passing season and some clubs have even developed a business model around the concept. 

But how did it all start? An interesting question with a fascinating history. Loans were not anything special when FA had initially set up the Football League; teams would do it as soon as the need arose, they would even loan players for the sole purpose for coping with a tough run of fixtures in the league. As teams started becoming frustrated with the ‘unsporting’ behavior, in the late 1890, after the FA had properly formed divisional football, loans were completely scrapped off and banned. They made a brief cameo after World War 2 but were introduced as we know them today in 1966 with Coventry’s John Docker joining Torquay United. A temporary transfer of players was allowed with the condition that each team could only make 2 during a transfer window. There were a few shuffles here and there, but the precedent had been set and . 

We are nearing 2021 after a rather strange year and loan moves have now become an integral part of club football, more so due to the implications of COVID-19 on club finances. According to KPMG’s analysis a few months right before the first lockdown, it was predicted that the European transfer market would lose about €10bn in player valuation.

Although in early September, another report from KPMG showed signs of recovery, it is safe to say that most clubs will be apprehensive of splashing the cash in the immediate future at least. Deals such as Kylian Mbappé’s loan move from AS Monaco to PSG might become more popular exactly when world class athletes are planning a change in scenery. 

The Good

There are plenty of positives to loan moves. Deals which would previously have been mega-transfers are now being conducted as a sort ‘probation period’ before handing them a permanent contract. This helps clubs avoid hefty fees and stay in the limitations of the financial fair play rules. On the flip side, the agreement gives a chance to world class players such as Alexis Sanchez, who’re on a poor run of form to capture their spark without the burden of the large fee weighing down on their shoulders. It provides several other sorts of opportunities for players, to create a place for themselves in the starting 11s, or get their career back on track as the likes of Wilfried Zaha (to Crystal Palace) and Romelu Lukaku (to West Brom and Everton) had successfully done.

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Lukaku scored a total of 33 goals in 75 appearances during his loan spells at West Bromwich Albion and Everton

The Bad

Kylian Mbappé’s bizarre ‘loan’ move to PSG caught the eye of many analysts and law makers in the football world. PSG had secured Neymar for a record-breaking €222m from Barcelona in one of the most surprising transfers in recent times and were looking to acquire the hottest property in Kylian. Instead of a permanent transfer, both the teams opted for a loan (€45 million fee) with an obligation to buy if PSG had avoided relegation that season – quite peculiar as PSG won the league that year – they signed him on a permanent transfer in the subsequent season for €180 million. 

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The deal was crafted in this way to avoid any breach of the financial fair play laws that allow clubs to have no more than a net loss of €30million. According to Financial Times’ analysis, loan-to-buy deals are becoming more common each year. This bending of the law, however, has not gone unnoticed as FIFA is set to limit the number of loanees a team could have to six players (aged 22 or older).

The Ugly

Finally, we take a look at Atlanta’s approach. This one is quite confusing for me to analyze. As a business graduate, I cannot help but appreciate the though-process behind the approach but at the same time as an athlete myself, I can’t not detest the treatment of athletes as commodities. Atlanta BC currently has 76 players on loan that either belong to the youth academy or were bought for a very small amount of fee. Not all players will break into Atlanta’s first team squad, some might not even be playing after a couple of years, but most will definitely be sold for at least a small profit. This has been quite a common practice in Italian football for the previous decade and a half. Parma had 100 players on loan to clubs around the world but had gone bankrupt as they were unable to pay their wages. These facets of loan/transfer business being conducted in football have raised many eyebrows and could be the reason of further amendments to laws relating to the transfer market.

The future? 

It is unclear how the transfer market will shape in the coming years as the pandemic has made it impossible to predict outcomes in all industries. Many clubs rely on loan moves to bring in talent that they could normally not afford for a season or two to either earn promotion, qualify for one of Europe’s two continental competitions or just for some stability in the squad. The possibility of a significant decrease or a cap on loans could financially burden many teams across the globe in light of the losses that most, if not all, clubs are facing at this unprecedented time. 

Sources

Financial Times (https://www.ft.com/content/9bd82b30-caf2-11e9-a1f4-3669401ba76f)

KPMG Football Benchmark (https://www.footballbenchmark.com/library/player_valuation_update_slight_recovery_of_market_values) 

NY Times (https://www.nytimes.com/2019/08/24/sports/soccer-loans.html)

Published by

Momim Amer

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