Chat with us, powered by LiveChat
Balanced Bridge Blog
Contract Advances for NBA Players
November 10, 2022
Contract Advances for NBA Players

Contract Advances for NBA Players Athletes – Helping NBA Players Manage Cash Flow

Contract Advances for NBA Players is a great way for players to get a fast cash infusion when they need it. NBA Players use contract advances for paying bills, investing in businesses, purchasing houses, and more.

Athlete funding is a topic that is often misunderstood. Many people think professional athletes never have to use loans or any other financial vehicles because they make so much money. But this is not true. NBA players need access to capital for the same reasons the rest of us do – to make large purchases like homes, unexpected expenses, taking care of their family, and more.

What most people don’t know is that it can be challenging for NBA Players to get a traditional loan. This is particularly true of newer players who have yet to establish a credit history.  

After reading this blog post, you will understand contract advances for NBA players, loans for NBA athletes, and Athlete Funding in general. You will know how contract advances work, how loans for NBA players work, why professional athletes often make use of athlete.

You will also become familiar with the various ways we have seen NBA players take advantage of athlete funding to help finance their lives and businesses outside of basketball.

What is Athlete Funding?

Athlete funding is the term used to describe various financial vehicles professional athletes use to finance homes, cars, businesses, travel, and living expenses.

What is a Contract Advance for NBA Players?

A contract advance is one of the more common types of athlete funding. It provides players an advancement on the money they will be paid in the future from their contract. Generally, a private lending company uses the NBA Player’s pending contract as collateral for issuing a loan to the athlete so that they can access some of their funds now. The loan is repaid once the money is released from the team.

Loans for NBA players

Loans for NBA Players is another financial vehicle that falls under the banner of Athlete Funding. Loans for professional athletes are becoming more common. There are a few reasons for this, but the main reason is, financial institutions and private lenders have become more sophisticated. They are looking for opportunities to loan funds to clients who fall outside the traditional 9-5 job with a traditional paycheck/salary arrangement.

This might seem strange, but there was a time when NBA Players could have tens of millions of dollars coming to them in just a few months, and traditional financial institutions wouldn’t approve them for any type of loan.

NBA Contract Advances

A contract advance, also known as athlete funding, is when a private lender loans money to an NBA player against their contract so they can have extra funds for various expenses. This could be anything from living costs and travel expenses to training fees and more.

How NBA Players Get Paid

To understand why athlete funding is important, you have to have some familiarity with how NBA Players are paid. NBA Players are typically paid a salary by their team. This salary can vary widely depending on the player’s position and experience.

One unique thing about the NBA is that it is one of the few professional sports leagues where their athletes are paid a salary every two weeks for the entire year, as opposed to only being paid during the regular season. This does help NBA Players smooth out some of the cash flow struggles other professional players experience who do not get paid during the off season and get paid only a little during pre-season.

About The NBA Salary Cap – NBA Teams Are Limited in What They Can Spend

NBA teams can’t spend “whatever they want” on their players. The NBA, like most professional sports leagues has a salary cap that limits how much each team can spend (in total) on their players each year. The salary cap is set at a certain amount each year and teams cannot exceed this amount. The salary cap helps to keep the league competitive and ensures that no one team can become dominant in the league by being able to “outspend” the other teams.

The salary cap for the 2023/24 season is projected to be $162 million per team. This means that each team can spend up to $162 million on all their players combined salaries for the year.

The NBA Salary Cap is important. Without it, the teams with the most money would always be on top because they would be able to outspend other teams and buy up all the top talent. The teams with less money would always be at the bottom and never move up because they would never be able to afford top talent for their team.

Source: https://www.nba.com/news/nba-salary-cap-and-tax-level-expected-to-rise-in-2023-24

So, when an NBA team is trying to determine salaries for individual players, they have to make sure they stay under the NBA salary cap for the entire team, and this limits how much any one player can receive.

So even though a player like Stephen Curry receives an annual salary of $59.6 million dollars, a player making the league minimum for rookies may only make one million dollars for their first year annual salary.

And if you pay attention to the NBA at all, you are aware that an individual player like thirty four year old Stephen Curry can receive salaries of almost Sixty Million dollars (and signing bonuses in the hundreds of millions). This leaves less money to pay the rest of the team.

Source: https://en.as.com/nba/what-is-the-minimum-and-the-maximum-salary-in-the-nba-n/

People With Regular Jobs Don’t Wait – Why Would an NBA Player Be Any Different?

If you’re a professional athlete, then you know that it isn’t always easy to get access to your money. Few people understand what it’s like not being able to buy a car or house even though you have millions coming to you but can’t touch it yet.

It can be incredibly frustrating to have millions of dollars coming your way, but not be able to access that money until later. This waiting period can cause you to miss out on opportunities too. like if a house you’re interested in goes up for sale, but you can’t get a loan to purchase it. Or if your family needs help paying bills, and you have a lot of money coming to you, but you don’t have it yet, so you can’t help them.

Contract advances for professional athletes exist because NBA Players are people too, and just like everyone else, they don’t want to wait until they have saved up enough money to make a purchase. Athlete Funding provides an opportunity for NBA Players to access funds so they can buy homes, cars, travel or invest in business opportunities without missing out on what they want.

Starting Out in the NBA is Expensive

Many athletes don’t live where they play, so they need a home for the off season, a home for the regular season, and travel for themselves and family. Living in two locations is incredibly expensive. Even though the NBA minimum rookie first year salary is one million dollars, you would be surprised how fast the money gets spent. Even if a rookie is expecting to get a huge signing bonus, they don’t normally get all that money up front. But they still have to lay out cash for travel, housing, and living expenses to practice and play.

Also, a lot of NBA draftees want to buy a home for their parents to thank them for supporting them before they turned pro. But signing bonuses are often paid out over several years. So instead of waiting to buy their parents a new home or a new car, they take out a contract advance instead.  

These are some of the reasons NBA Draftees use contract advances and other Athlete Funding financial vehicles when they are starting out. It allows them access to some of their money right away to cover these new expenses.

Without established credit or having three years of tax returns showing they can pay back the loan, banks may be reluctant to loan money to rookie athletes as they don’t always understand their pay schedule.

Off-Season NBA Training is Expensive

Off season training for NBA Athletes has become increasingly important over the years. Most professional athletes spend their off season traveling to different facilities to train shooting, dribbling, ball handling, conditioning, strength, agility, and more.

There is a lot of competition among players to get and keep their starting positions. NBA Players, like most professional athletes are always looking for an edge. So, if their competition is traveling and spending money on training, an intelligent athlete is going to do the same thing. Specialty coaches, consultants, nutritionists, scientists, equipment, and travel are expensive. But without them, it is too easy to fall behind the competition. Everyone wants those starting spots, so everyone is training in the off season, trying to gain a competitive advantage.

Cash Flow Challenges for NBA Players

How NBA Players Can Manage Cash Flow

Cash flow is about getting money in the bank and keeping enough of it to pay your monthly expenses and cover any other expenses that crop up.

This is one of the reasons people use financing to help manage cash flow.

A lot of people incorrectly assume that becuase NBA Players make a lot of money, that they don’t “need” financing to purchase things. But this isn’t the case. Even if a player did make enough money each month (or year) to buy larger purchases with their savings, making those large purchases would take huge chunks of cash out of their bank account, leaving them exposed to emergencies within their family, or limiting them from making business purchases.

Instant gratification isn’t the only reason people take out loans. They use financing to keep most of their money in bank so it is available to them in case they need it. Even if you were able to save up a large amount of money (like $750,000 as an example). If you spend all that money on a home, you don’t have the money in the bank any longer. And if anything happens, you might be able to sell that home quickly to come up with some money. Trying to sell things fast usually means lowering the price, which means losing money.  

This is why most people, even if they could save up the money for large purchases, use financing instead – so they can keep as much of their money in the bank as possible. NBA Players are no different. Why should they spend their own money when they can spend the bank’s money, make their monthly payments, and maintain plenty of cash in the bank to cover expenses?

This isn’t just individuals either. Major businesses do not finance their future growth out of their own cash account. They take out loans, sell equity, seek private equity investors, and sell debt to pay for major expansions, acquisitions, and equipment. They finance their growth with other people’s money and keep their own cash in the bank account.

Finance Options For NBA Players

  • Contract Advances
  • Credit Cards
  • Loans
  • Owning Businesses
  • Signing Bonus Advances

Contract Advances for NBA Players

One thing an NBA Player can do to help keep cash in the bank is to take out a contract advance. A contract advance allows NBA Players access to money right away. A contract advance allows players to “take an advance” on the money they have coming to them from their NBA contract.

By taking out an advance on your NBA contract, you can get some of your money now to pay for things you want or need. Most athletes take advantage of contract advances. And not just draftees or rookies. Veteran athletes who are waiting massive signing bonuses often take out partial advances to buy a house, take a trip, buy a car, purchase a business, make an investment, etc.

What if I Just Want a Contract Advance to Buy a Nice Car?  

NBA Players have put in the hard work to be where they are, so why not reward themselves with a new car? Contract advances make it easy to do just that. Although there are some restrictions on what players can spend their contract advance money one, things like cars aren’t usually an issue. Neither is buying a new car for your parents.

Can I Buy My Parents a House with My Contract Advance

Certainly, if you have the means, NBA players often buy their parents a new home or pay off an existing mortgage to express gratitude for their help along the way. You could buy every member of your family a house if that is what you wanted to do.

Credit Cards for Managing Cash Flow

NBA Players can use credit cards to help manage cash flow. But there may be a few challenges with credit cards for NBA Players. One, to be approved for a credit card you need a good credit score. Two, it is hard to know how much credit you will qualify for. If you are planning on using credit cards to help manage cash flow you will need a sizeable credit limit. Otherwise, you can run out of credit and not have the money to pay the monthly minimums until you get your next bonus.

Credit cards also tend to charge high interest rates and may also have annual fees. If you are only making your minimum monthly payments on your credit cards, it can take more than a decade (in some cases) to pay them off. Plus, if you miss a payment, most credit card companies automatically raise your interest rates even higher, and never bring them back down even when you get back on track.

In addition, credit card companies change their lending standards a lot. One day, without warning or explanation, they simply close your account. Often this happens right after you pay off the card. You suddenly get a notice that your credit card has been cancelled. This happens to people every day. The credit card companies decide they no longer want to loan you money and they simply close the account.

Athlete Loans for Managing Cash Flow

NBA players may be able to get a traditional loan to pay for things like a car or home, but if you want a loan for travel, or buying a second (or third) home, a vacation home, or purchasing a business, those loans are not as easy to get (generally).

Banks have very specific lending standards when it comes to making loans. They usually want to see two to three years of tax returns as well as bank statements. This is tough for newer players who may not have two or three years of tax returns to show how much they earn currently. You also may not have well established credit yet if you are a newer team member, which will impact your ability to take out a loan for athletes.

Debt to Equity is another factor. Even if you are a veteran player, if you have taken out a lot of loans already, it will generally reduce the amount of money you can borrow in the future. The more money you owe creditors, the less amount of money they tend to loan you until your other balances are paid down.

Lastly, bank normally want collateral to back their loans. This might be real estate, the car you intend to purchase, or stocks and bonds. Banks do not make a lot of unsecured loans. They normally want collateral. And if they do make an unsecured loan, it is often only to individuals with the best credit scores, and even then, interest rates and fees for unsecured loans are often much higher than loans backed by collateral.

We do not mean to disparage traditional loans or banks. Once you have an established history with your team and a few tax returns to show, most athlete loans are made by traditional banks.

But until then, using third party finance companies like Balanced Bridge Funding for Athlete Loans is a great alternative to traditional loans. We understand NBA Player salaries, bonus structure, and how everything works. We look at NBA Players as a great investment because we understand how everything works.

Savings for Managing Cash Flow

Trying to finance your cash flow with your own savings is often difficult. Even for veteran players with massive salaries. Plus, spending your savings on big purchases leaves no room for important opportunities that come up. If a fantastic business investment opportunity arises, but you’ve just spent all your savings, you miss that opportunity.

Most businesses do not finance their cash flow with savings. They use factoring (advances), loans, lines of credit, private equity, and selling stocks or bonds. If you start thinking of yourself as a business rather than just a professional athlete, it will change your perspective on how you look at finance cash flow. Making financing decisions like a business instead of a person will help you make better cash flow decisions for the long run.

Buying Businesses to Manage Cash Flow

Did you know that Shaq owns nearly 10% of all existing Five Guys Franchises? He does. Many NBA players purchase businesses because they know their NBA Career isn’t going to last forever. Savvy NBA Players invest their earnings in businesses that will keep earning enough money in the future to keep up their current lifestyle indefinitely.

“I learned from the great Magic Johnson that it’s okay to be a basketball star, but at some point, you want to start investing in businesses.”
Former NBA Player Shaquille O’Neal
Tweet

Source: https://english.elpais.com/sports/2022-06-23/shaquille-oneal-the-king-of-franchises-155-burger-joints-40-gyms-and-a-fortune-of-400-million.html

Here are just a few types of businesses professional athletes own:

Source: https://www.gobankingrates.com/net-worth/sports/athletes-major-business-empires-outside-sports/

And these are just a few of the business’s athletes own. Some athletes have their television production companies or have founded startups ranging from athletic apparel companies (like Venus and Serena Williams) to vitamin companies (like Tom Brady).

They buy and operate these businesses because of the cash flow that comes from them. They know that someday, they won’t have money coming in from their athletic career any longer. So, they invest the money they receive from playing sports into businesses that will continue paying them long after their career as a professional athlete is over.

NBA Players Invest in Franchises

You will notice in the source article from above that lots of big name professional athletes invest in franchises (like Shaq).

Source: https://www.gobankingrates.com/net-worth/sports/athletes-major-business-empires-outside-sports/

Franchises may be the best type of business for professional athletes to own. If you invest in a good franchise, it doesn’t matter if you don’t have a lot of business experience. Franchisers know precisely what you need to do to successfully operate their business model and they train you how to do it. You can own fifteen, fifty, or even five hundred locations without spending every moment of your life managing them yourself. You just follow the franchise model to success.

So, if you are an NBA Player and looking to invest in a business, buying successful franchises is a wise decision for a lot of people. Business statistics show that in their first year, almost half of all businesses fail – EXCEPT – franchises. 96% of franchises are still open after their first year. These are important numbers. Opening a new business is hard. Franchises make it easier because they have already figured out how to succeed. You just have to follow their model.

Franchises Are Expensive

You might be asking yourself, “if franchises are so great, why isn’t everybody doing it?” The truth is most people can’t afford to buy a franchise. A single location franchised restaurant can cost millions (and often do). And most franchise owners won’t let you buy a single location. They want you to open ten to twenty locations within the first few years of ownership. This makes owning a franchise difficult for the average person. But for NBA Players who make a lot of money playing their sport, they have the buying power to consider purchasing really well established franchises.

Source: https://www.therichest.com/business/the-top-10-most-expensive-franchises-in-the-world/

NBA Signing Bonus Advances for Managing Cash Flow

If you have an NBA signing bonus coming to you, taking an advance can be a great way to help manage cash flow. Athlete funding companies like Balanced Bridge Funding know your signing bonus is guaranteed, which is why we are willing to loan money against it.  The way signing bonus advances work is, we purchase a portion of your signing bonus today for a fee, and then when the team pays the signing bonus, the team pays us what we are owed, and they pay you the remainder of what you are owed.

NBA Rookies often use a signing bonus advance to help fund travel for themselves and their families to their new city. Veteran athletes can use them as well to finance business opportunities as they arise and to purchase new homes, or other investments. The old saying goes “opportunity waits for no man.” Taking out an NBA Contract Advance is a great way to make sure you have the funds you need to not miss out on the opportunities that come your way.

Summary Contract Advances for NBA Players

Very few NBA Players are going to finance major purchases with their savings. Even star players who seem to have a salary you could never spend still use financing to keep most of their cash in the bank. They make their monthly payments and keep their savings robust.

If a great opportunity for investment or business comes up, and you’ve spent all of your savings, then you’ve missed that opportunity and it might not come around again. The same goes for housing opportunities; if the perfect home comes on the market, but you’ve depleted your savings on other major purchases, you are not going to get that house – no matter how much money you will have “in the future.” You can’t spend “future earnings” today. But you can take out an advance on your future earnings with a company like Balanced Bridge Funding and get the money you need right away.

Not every NBA Player is going to qualify for a loan or line of credit. Banks keep an eye on credit scores, insist on collateral, and have precise lending criteria that are not always favorable for professional athletes. This is especially true for draftees or newcomers – banks normally want to see three years’ worth of tax returns to validate your earnings, and you may not have been on the team that long if you’re a draftee or rookie.

Some athletes use credit cards to finance cash flow. However, credit card interest rates and charges are often high. Plus, you may not have a credit limit high enough to buy everything you want to buy. Most credit cards with large limits, like certain American Express Cards, do not allow you to carry a rolling balance. You have to pay them off by the end of each month. This is great for building up reward points, but not so good for trying to finance your cash flow.

Many athletes purchase businesses (franchises in particular), to keep money coming in after their career ends. Business loans can be difficult to obtain, but with a contract advance you can get the funding you need right away to take advantage of business opportunities as they arise.

Using an NBA Contract advance or NBA Signing Bonus Advance is a great way to get some of your money right away to buy the things you want, and take advantage of business or investment opportunities as they arise.

Very few people will ever know what it is like to have millions of dollars coming to you and still not be able to buy a home or car because you simply do not meet the lending standards of old school financial institutions. But at Balanced Bridge Funding, Athlete Funding, including NBA Contract Advances and NBA Signing Bonus Advances are one of our specialties. We have been working with NBA Players for years and we understand how their pay works and how frustrating it can be to not be able to gain access to funds to buy the things you want. We know athletes, and we are here to help.

More Details About NBA Contract Advances from Balanced Bridge Funding

How Much Money Can I Borrow Against My Contract?  

If you work with Balanced Bridge Funding, we can generally fund up to five million dollars against your contract – or – as little as $25,000. A lot of this depends on the size of your contract, how much of a contract advance you can take out.  

How Long Does It Take To Get Approved For an NBA Contract Advance Loan?  

This is the best part. You can be approved and have your money from a contract advance in a matter of days. You simply provide the documentation we need, sign your agreement, and we send you the money right away. It is easier than you can imagine.  

Is An NBA Contract Advance an Actual Loan? 

Yes, an NBA contract advance is a loan, funded by a finance company like Balanced Bridge Funding, instead of a bank. But it is still a loan.  

Why Wouldn’t I Just Borrow the Money from a Bank Instead of Using a Contract Advance?  

One of the reasons you might work with an athlete funding company like Balanced Bridge Funding is because we have different lending standards than banks as far as professional athletes go. We work with athletes, so we know how the payment system works and we see future athlete earnings as great collateral. It isn’t that we are any different from a bank – we just have different lending standards that are favorable to professional athletes.

Is Balanced Bridge Funding Just a “Middle Man” or a Broker?  

No, Balanced Bridge Funding is a direct lender. We are not a broker for some other company who loans the money. This is important because if there are any issues with your loan approval or after the loan is made, you are dealing directly with the source of your loan instead of a broker who has no real say in any part of the process.  

How Does a Contract Advance Work?  

A contract advance is simple. You send us some paperwork showing the value of your upcoming contract, we negotiate how much of a contract advance you want to take out, we agree on fees and conditions, you sign our agreement and within a few days you will have the cash in your bank account. Just Click Apply to Get Started.

How Does Balanced Bridge Funding Make Money on NBA Contract Advances?  

We get paid much the same way as any financial institution, and for the same reasons. We essentially get paid to “wait for the money.” You get your money now, and for a fee (often referred to as interest), we wait to be paid from your contract sometime in the future.

The fees vary a great deal depending on the size of the advance, the length of time we must wait to receive our funds back from your contract, and other factors. We do not publish our fees online, as they change often with the market. If you call us, we can tell you what your fees will be today.  

To Apply for a Contract Advance – Click Here

Case Study: Buying a New House with A Contract Advance

The Request:

We received a request to secure real estate financing on a $5.3 million home for an NBA Player who had just signed a $40 million contract.

The Challenge:

The Player, with limited credit history, limited cash reserves relative to the purchase price, and insufficient tax returns to satisfy the mortgage underwriting requirements, had to put a significant amount of money down to qualify for the mortgage; but they were not going to receive their money for several months (until camp started up).

What We Did:

We were able to provide this client with a contract advance for 104% of purchase price to include all closing costs and fees.

The client ultimately saved 8% by doing a cash purchase of the home. The Player was not required to use his own funds for a down payment, and he closed on the home loan in 7 days.

About Balanced Bridge Funding

Balanced Bridge Funding provides funding for professional athletes from the NBA, NBA, NHL, MLB, American Soccer League, and even referees and coaches from all of the major leagues. If you are an athlete with a guaranteed contract, chances are we can fund a contract advance for you, and have your money to you quickly. To get started, please begin by Applying. Just Click Apply to Get Started.

Balanced Bridge Funding In the Media

Why Wait?

When you need money to pay the bills, see a doctor, grow your firm, or cover case cost expenses, the last thing you want to hear is “wait.” We offer a range of customized funding solutions so you never have to wait.