Financial expert sheds light on Sheffield United’s ‘payday loan equivalent’ deal with ‘vampire bank’

What at first glance looks like quite boring legalese was actually rather intriguing, as the 38-page document detailed United’s arrangement with the London branch of the Macquarie Group; the Australian bank which is providing the Blades with an undisclosed and guaranteed initial amount of money on their Premier League parachute payments.

It’s certainly not new – The Star first reported that United did business with Macquarie and set up a loan facility in 2019 – but with the bank known as ‘Vampire Kangaroo’ due to their A ruthless focus on profits has left some Blades fans with little concern for the club’s financial future.

So we spoke to football finance expert Kieran Maguire, a lecturer at the University of Liverpool and author of The Price of Football, to try to figure it all out…

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What are we dealing with here?

This is actually a renewal or renewal of the relationship between United and Macquarie Bank. Parachute payments come in lump sums over a period of time, much like Premier League funds.

And all he says is that Sheffield United are awaiting their next payment from the Premier League and could do with some cash now. So Macquarie said, “We’ll give you the money now.”

It’s a little more sophisticated, but it’s basically equivalent to a payday loan. If you have cash flow problems today and you have guaranteed money in a month or a few months, the banks will lend you on the basis that when you get that guaranteed money, it is transferred to the bank.

Football finance expert Kieran Maguire

It’s a cash management problem, more than anything, and it’s very, very common in football. Even some so-called “blue chip” clubs are involved.

Manchester United have taken an overdraft facility with certain banks for £200m, Spurs have taken out over £630m in loans. How can we buy a house if we want to buy one? We get a mortgage.

Debt in itself is therefore not a problem. If there is a cheaper alternative, which could potentially be the owner investing the money, then that is fine, but it may not be feasible for a number of reasons. This could be the structure of the club, the owner may have their wealth tied to assets.

So is this arrangement common?

Sheffield United’s Bramall Lane Stadium – Tim Goode v PA

It is certainly quite common. Southampton, my club Brighton have taken a similar loan from Barclays, West Ham… many clubs are involved. And remember, we are coming out of the biggest health crisis the world has seen in a century.

These arrangements existed before Covid, but they have accelerated since coronavirus in terms of clubs going to these third parties. Southampton, Derby, Sunderland have borrowed…if I went through the full list it would be quite extensive.

Why would a club go down this path?

It’s more of a cash flow issue than anything else. Clubs are constantly setting budgets and identifying when they need money for specific issues.

United will still owe money to other clubs for signings such as Rhian Brewster – George Wood/Getty

Even though United had had a quiet transfer window which had just passed, they had existing creditors of £95million in the accounts until July 2020. So some of that should have been paid and some would be linked to transfers in progress, payments to players.

They signed a few players in the summer of 2020 and maybe paid half the fee then, and the rest over the next two years. We fans forget that because we tend to assume that if you sign a player for £23m you pay it all in one go.

But it is the ongoing commitments that need to be taken into account and that create cash flow needs at these clubs, potentially requiring going to an institution such as Macquarie.

How much will it cost United?

The costs for the clubs are interest charges. There was an article online recently that suggested clubs pay an average of six to eight per cent, which isn’t obscene.

It’s not cheap, but it’s not obscene. It could be that Macquarie has loaned United some of the payments they will receive over the next few years. After all, you don’t get a 100% mortgage for your house from a bank. So it could be £10m, £20m, £80m. We don’t know the amount involved.

United were the Premier League’s highest-grossing club in 2019/20. They had a fantastic season after leaving the Championship, so the players would have had increases in their contracts but wouldn’t be on the amounts that many other players from other clubs would have had.

Last season there were more stages and players expecting Premier League salaries and the benefits may have evaporated.

So, is there a reason Blades fans are concerned?

You have to look at a club’s short-term and long-term financial needs, and I think those are short-term cash flow issues. It is up to the management team to ensure that the debts can be paid.

Routine bills need to be paid when due, as is the case for all businesses and for all of us in terms of personal finances. Going forward, the club still have assets they can sell and I think it was expected that some of the players who are still at the club would have left this summer. But they could leave in 12 months.

But there is no need to panic at first sight. I’ve borrowed money when I had to in the past, and I’m still here.