Football transfer fee finance: drawing transfer instalments upfront

Yes, on transfers it applies to. Under FIFA's solidarity mechanism, 5% of the transfer compensation is held back by the buying club and passed to the clubs that trained the player between the ages of 12 and 23, in proportion to the seasons each one had him. Since November 2022 these training rewards have been paid through the FIFA Clearing House, which collects them and pays the training clubs. For the selling club, the cash it will actually receive is the fee less that deduction, so a funder advancing money against the instalments sizes its advance on the net figure, not the headline fee.

Does the solidarity contribution apply to transfers between two English clubs?

It can. Since FIFA's 2020 changes, a transfer between two clubs in the same country triggers solidarity payable to any training club affiliated to a different country's association. A player who spent part of his youth at a club abroad can therefore bring a deduction into a deal between two English clubs. The transfer agreement and the player's registration history show whether that applies, and a funder will ask for both.

• Net receivable. Fee less solidarity and any training compensation.
• Instalment dates. When each payment falls due from the buying club.
• Training history. Clubs and countries where the player trained from 12.
• Agreement. The signed transfer agreement and payment terms.

FIFA explains the transfer system and Clearing House. Our football club finance hub covers wider club funding, and floodlight finance covers ground works. Instant Quotes shows panel lenders that consider receivables finance.

No. Transfer fee finance advances money against instalments a buying club has already agreed to pay on a completed transfer, so the funder only has a right to receive fixed sums that already exist. Third party ownership gives an outside investor a share of a player's future transfer value, which FIFA rules have banned since May 2015, and the Premier League and the EFL apply their own restrictions. Funders and their lawyers draft the assignment so that it gives no influence over the player or the club's decisions, and the league may need to see the documents.

Can an investor take a share of a player's future transfer fee?

Not under FIFA rules. No club or player may agree with a third party that the third party is entitled to part of future transfer compensation, and clubs that breach the rule face sanctions. A sell on clause agreed between two clubs is different, because both parties are clubs in the transfer chain, and once a future sale completes that sell on payment can itself become a receivable a funder may consider.

• Crystallised sums. Fixed instalments due on a completed transfer.
• No influence. No say for the funder over the player or the club.
• League review. Whether the league needs to see the documents.
• Notice. Whether the buying club is told about the assignment.

FIFA publishes its transfer system rules. Clubs that need cash before a sale completes can look at a working capital loan or a revolving credit facility. Instant Quotes lists panel lenders that fund clubs.

Transfer fees are often agreed as a total but paid over several years. The selling club records a fee it is owed, but the cash arrives in stages on dates set in the transfer agreement. Meanwhile the club may want to reinvest in its squad, pay wages, settle its own transfer instalments to other clubs or reduce owner loans. Football transfer fee finance closes that gap: a lender advances most of the money still owed now, and is repaid as the buying club pays each instalment.

The same tool works the other way round. A buying club can sometimes fund part of a purchase so that it pays the selling club on time while spreading its own cost, or can raise funds against fees owed to it from earlier sales to pay for a new signing.

Most facilities work by assignment of receivables. The selling club assigns its right to the future instalments to the lender. The lender pays the club an advance against those instalments, less its charges. The paying club is told of the assignment and pays future instalments to the lender, or into an account the lender controls. When the final instalment is paid, the facility is cleared.

The structure is close to selective invoice finance: the club chooses which transfer receivables to fund, rather than funding all of its income. Because one paying club often accounts for the whole receivable, it also has a lot in common with high concentration invoice finance, where the lender focuses on the payer more than the seller.

The money can usually be used for any lawful purpose: squad investment, wages, other transfer commitments, ground works or repaying more expensive borrowing.

Lenders fund the fixed, unconditional instalments in the transfer agreement. Add-ons that depend on appearances, goals, promotion or other events are usually not funded until they are triggered, because they may never become payable. Sell-on clauses, which give a club a share of a future sale, are generally not funded either: there is no fixed amount or date until the player is sold again. Any part of a fee owed onwards to another club, an agent or a former club is normally deducted before the advance is worked out.

If the paying club defaults, the facility terms decide who bears the loss. With recourse, the selling club must repay the lender; without recourse, the lender takes more of the risk and charges more for it. Check which applies before you sign. Advancing future instalments also spends money the club would otherwise receive in later seasons, so the club's future budgets must still work without it.