Finance expert gives lowdown on Sheffield United's 'payday loan equivalent' arrangement with 'vampire bank'

What sounds on the face of it like pretty dull legal jargon was actually rather intriguing, as the 38-page document detailed United’s arrangement with the London branch of Macquarie Group; the Australian bank who are providing the Blades with an undisclosed amount of cash upfront and secured on their parachute payments from the Premier League.

It's certainly nothing new – The Star first reported on United doing business with Macquarie and setting up a loan facility back in 2019 – but with the bank known as the “Vampire Kangaroo” because of their ruthless focus on profits, it had some Blades fans a little worried 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 book The Price of Football, to try and understand the whole thing…

What are we dealing with here?

This is effectively a rollover or renewal of the relationship United have with Macquarie Bank. The parachute payments come in lumpy amounts over a period of time, as do the monies from the Premier League.

And all it's saying is that Sheffield United are awaiting their next payment from the Premier League and could do with a bit of cash now. So Macquarie have said: “We'll give you the cash now.”

It's a bit more sophisticated but it's broadly equivalent to a payday loan. If you've got cashflow issues today and you have guaranteed money coming in in a month or a couple of months’ time, then banks will lend to you on the basis that when you get that guaranteed money, it's passed over to the bank.

It's a cashflow management issue, as much as anything, and it's very, very common in football. Even some so-called ‘blue chip’ clubs are involved.

Manchester United have taken out an overdraft facility with some banks for £200m, Spurs have taken over £630m worth of loans. How do you and I afford a house if we want to buy one? We get a mortgage.

So debt in itself is not an issue. If there's an alternative which is cheaper, which could potentially be the owner putting in money, then that's fine, but that may not be feasible for a number of reasons. It could be the structure of the club, the owner may have their wealth tied up in assets.

So this arrangement is a common one?

It’s certainly quite common. Southampton, my club Brighton took out a similar loan from Barclays, West Ham… lots of clubs are involved. And remember, we are coming off the back of the biggest health crisis the world has faced for a century.

These arrangements were around pre-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 pretty sizeable.

Why would a club go down this route?

It tends to be more of a cashflow issue than anything else. Clubs are putting together budgets all the time and identify when they need cash for specific issues.

Even if United had had a quiet transfer window just gone, they had existing creditors of £95m in the accounts to July 2020. So some of that would have had to have been paid and some would relate to outstanding transfers, instalments on players.

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

But it's the ongoing commitments that need to be addressed and that builds up a cashflow requirements at those clubs, which potentially necessitates approaching an institution such as Macquarie.

What will it cost United?

The costs to the clubs is an interest cost. There was an article online recently that suggested clubs pay on average between six and eight per cent, which isn’t obscene.

It isn’t cheap, but it isn’t obscene. It could be that Macquarie have loaned United a portion of the payments they’ll get over the next few years. You don’t get a 100 per cent mortgage from a bank for your house, after all. So it could be £10m, £20, £80m. We don’t know the sum involved.

United were the most profitable club in the Premier League in 2019/20. They had a fantastic season after coming up from the Championship, so the players would have had step-ups in their contracts but wouldn't be on the amounts that many other players at other clubs would have been on.

Last season, there were more step ups and signing players expecting Premier League wages and the profits may have evaporated.

So, is there any cause for Blades fans to worry?

You've got to look at a club's financial requirements in both the short and long term, and I think this is dealing with short-term cashflow issues. It's up to the senior management team to ensure that the debts can be paid.

The ongoing bills have to be paid as they fall due, as is the case for all businesses and for all of us in terms of our own personal finances. Going forward, the club still has assets it can sell and I think there was an expectation that some of the players who are still at the club may have moved on in the summer. But they might go in another 12 months.

But there’s no need to panic on the face of it. I’ve borrowed money when I've had to in the past, and I'm still here.

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