Financing Pre-Season and Off Season for Professional Athletes – Helping Athletes Manage Cash Flow
Financing Pre-Season and Offseason for Professional Athletes
Most professional athletes do not get paid a regular paycheck all year round. Financing Pre-Season and Offseason for Professional Athletes. During the off season most Major League Baseball Players, NFL Players, and National Hockey League Players do not receive any checks, or if they do, are at a much lower rate than during regular season play. Because of this, professional athletes are often left using credit cards or loans to finance preseason or off season.
This is a challenge because credit cards often have high interest rates, fees, and offer insufficient capital for financing things like real estate or purchasing businesses. Traditional loans are not always easy to get approved. Plus, the amount you qualify for is often limited by credit score and other debts.
And all of this is happening while the athlete knows they have millions of dollars coming to them in just a few months. But until they receive their money, they basically have to wait to buy the things they want, and may miss opportunities like buying a home that just came on the market or putting money in an investment that is about to increase in value.
Waiting For Funds Can Cause Missed Opportunities
Very few people will ever know what it is like to be a professional athlete who has a great deal of money coming to them very soon in the future but can’t get access to it to buy a car, a house, travel, or invest in a business opportunity. But if you are a professional athlete, you know all about this.
It can be frustrating to know you’ve got millions of dollars coming to you, but until you get it, you are missing out on opportunities. If a house comes up for sale and you and your family are interested in it, you have to wait. If your family needs some money because they are struggling to pay some bills, you can’t help them until you get paid yourself. If there is a new car coming out you really want, you can’t buy it because you don’t get paid during preseason or off season.
This is precisely why contract advances for professional athletes exist – because there is a need for professional players to be able to access capital to buy homes, cars, travel, or invest in business opportunities. By using a contract advance, you have the ability to get access to some of your money now for a fee, so you don’t have to miss out on buying the things you want.
Why Professional Athletes Take Out Contract Advances During Pre-season or Off Season
Professional athletes are in a unique position in that they receive large salaries and bonuses, but they get paid at irregular times, and sometimes, they are not being paid at all, like during the pre-season or off season. It is entirely possible to have tens of millions of dollars coming to you (guaranteed) and not be able to purchase a house or car or travel with your family. This is especially true for draftees.
These tend to be the main reasons athletes take out contract advances. They have money coming to them. Lots of money. But if you want to purchase a house or car, and you don’t have the money right now, then you are forced to attempt to take out loans, which is not always easy to do, and is rarely going to happen quickly.
Many athletes don’t live where they play, so they need a home for the off season, a home for the regular season, travel for themselves and family, and all of the expenses that come with living in two locations. Also, it is common for draftees to want to buy a home for their parents to thank them for supporting them before they turned pro. It can be frustrating to know you have tens of millions of dollars coming to you, and not being able to buy a car, let alone a home or a second home.
Draftees and rookies can struggle mightily to gain access to capital before they start getting paid by the team. Without established credit or three years of tax returns showing they can pay back the loan, banks may be reluctant to loan money to professional athletes as they don’t always understand their pay schedule.
But it isn’t just draftees or rookies who make good use of contract advances. Veteran athletes are often looking at second (or third) homes to purchase. They also like to purchase businesses and investments. If they have to wait for their next check to take advantage, they can miss opportunities or delay their future success. Because of this, they take out advances on their contracts to get the money they need right away, rather than waiting and hoping the opportunity or investment will last until they get paid.
Off season training has become a big deal over the years. Most professional athletes spend at least some of their time traveling to different facilities to train skills, strategy, strength, agility, Etc. All this training costs money and is a significant investment. If your competition is out-training you because they are investing in new technology, better coaching, nutrition counseling, and better training facilities, they might gain an edge over you. Specialists, equipment, and travel are expensive, and you will need access to your funds to pay for these career enhancing necessities to stay competitive during the off season.
Whether you need funds for off season training, or to travel to your new city, or buy a car, purchase a home, second home, or vacation home, or invest in a business opportunity, using a contract advance is one way to get some of your money right away to get the things you want.
Waiting For Money Creates Cash Flow Problems for Professional Athletes
What is Cash Flow for Professional Athletes?
It might seem odd to people who don’t know professional sports that professional athletes making great salaries and bonuses can have cash flow challenges, but they do. This isn’t unique to professional athletes; any time you have money “flowing” out of your bank account on a regular basis, and you have money “flowing” into your bank account at irregular times, you are going to have cash flow problems. This is true for all businesses.
But before we get into that, let’s talk about what cash flow is, and what it means. People in business talk about cash flow a lot, but very few people truly understand what it is. The good news is understanding cash flow isn’t complicated.
Cash flow is simply the term used to describe the “flow of cash” INTO your bank account versus the “flow of cash” OUT OF your bank account.
So, when people talk about cash flow, all they are talking about is “the flow” of money coming in versus the flow of money going out.”
What is Cash Flow management?
Cash flow management is any activity used to attempt to regulate these two flows of cash (cash flowing versus cash flowing out). The goal of cash flow management activities is to keep the money flowing into the account faster than it leaves.
Most people tend to think of cash flow management primarily as keeping your spending down. But the truth is, most serious businesses don’t spend a lot of time trying to reduce the money going out. Instead, they tend to focus more on keeping cash coming in. They do this by borrowing money, selling bonds, selling stock (equity), factoring the money they are owed (selling it early as a discount), and trying to drive up revenues.
In the case of professional athletes, the equivalent would be trying to get access to your money as quickly as you can. Otherwise, all you can do is try to keep your spending down so you don’t run out of money before you get paid next.
What are Cash Flow Problems?
Cash flow problems are the only real reason people care about cash flow. Professional Athletes have “cash flow problems” because they don’t get paid every week like people who have a nine to five job. They have money flowing OUT of their bank account constantly (like everyone does) to pay bills, tuition, mortgage, travel, Etc., but the money only comes in occasionally (even though it is in massive quantities).
When your money is flowing out quickly and flowing in slowly you tend to have “cash flow problems.” Why? Because the money is “flowing out” faster than it is “flowing in” and if this continues to happen long enough you can run out of money to pay your bills, even though you have a large sum of money guaranteed to you in the future.
When you don’t have any cash in the bank, it doesn’t matter if you have tens of millions of dollars coming to you soon. You need cash to pay for things. You can’t spend your signing bonus until you have it in the bank, no matter how large it is going to be.
What Causes Cash Flow Problems for Professional Athletes?
Cash flow problems for professional athletes are also caused by the “timing” of when they get paid (money flowing into their bank account) versus the timing of when that money gets spent (money flowing out of the bank account).
Understanding the Timing Problem – If you get paid three and a half million dollars in August (money flowing in), but you don’t get paid again until the following August, you will watch your money decline for an entire year as you spend money to live on (money flowing out).
Because you get paid at irregular intervals as a professional athlete, but you spend your money at regular intervals on bills and living expenses, you have a situation where the “timing” of money coming do not match the “timing” of money going out, which creates cash flow problems.
This doesn’t just happen to professional athletes. Most businesses have this kind of challenge. Lawyers who work on a contingency fee basis may work for years on a case, conclude the case, and wait years before they get paid. And during the entire process, they still have to pay rent, salaries, expert witnesses, court costs, travel costs, and more. This creates cash flow problems.
In truth, just about every type of business has cash flow struggles created by money going out constantly, and money coming in occasionally. Ask any business owner and they can probably tell you about times when they had to take out a loan or pawn something to pay the rent while they were waiting on a customer to pay them for work they had done earlier in the month. This happens every day in all types of businesses.
Infographic – The Basic Cash Flow Problem for Professional Athletes
Money goes out every single month, but money doesn’t come in during the off season and very little money comes in during pre-season play so cash keeps going down, down down, and then something they want to buy pops up, and even though they have millions coming in “soon” – they still can’t buy the thing or take advantage of the opportunity because they don’t have any cash.
How Professional Athletes Can Manage Cash Flow During Pre-season or Offseason
The main issue pro athletes need to address to help resolve their cash flow challenges is to address the “timing issue.” There are many financial vehicles available to help professional athletes get some of their money right away when they need it or want it.
Some financial vehicles may be:
- Contract Advances
- Credit Cards
- Stock Dividends
- Owning Businesses
- Signing Bonus Advances
Contract Advances for Pro Athletes?
One thing a pro athlete can do to help solve cash flow challenges is to use a contract advance for athletes. A contract advance allows athletes to get some of their money now and the rest later. A contract advance allows professional athletes to “take an advance” on the money they have coming to them “down the road” from their contract (or signing bonus).
By taking out an advance on your professional athlete contract, you can get some of your money now to pay for things you need during the pre-season or off season and collect the rest when it is owed to you.
Most athletes take advantage of contract advances. And not just draftees or rookies. Veteran athletes who are waiting for 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.
Contract Advance for Preseason
Until the season begins, you will only make a minimal amount of money. During that time, you may need to buy a new home in a new city for you and your family. You will probably have to travel to spring practice and stay there. Did you know that Major League Baseball rookies receive less than $400 per week per diem during spring training camp?
That isn’t a lot of money to live on. You might be just out of college and need a car. You might need to rent an apartment for yourself or your family. It is expensive to relocate to a new city. It is even more expensive if you want to maintain a residence in your hometown, and a residence where your team is located, which is a normal thing professional athletes do.
A lot of professional athletes don’t live full time where they play. Drew Brees didn’t “live” in New Orleans while he quarterbacked for the New Orleans Saints – he lived in San Diego and stayed in New Orleans during football season.
What if I Just Want an Athlete Contract Loan to Buy a Cool Car?
No problem. We know you’ve worked hard for a long time to get a spot on a professional sports team. Why shouldn’t you get a nice car? It is very common for pro athletes to take out a contract loan to buy a new car.
We have all heard the story of the professional football player who drives an old plain looking car. But the truth is, that story is retold repeatedly because it isn’t what most people do.
Of course, you want a nice car. Everyone else on the team is going to have one – why not you?
Can I Buy My Parents a House with My Contract Advance?
Of course, you can, and lots of players buy their parents a home or pay off their existing home as a way of showing their appreciation for all the work their parents put in to help them get where they are now. You can buy every member of your family a new home if you want to. It’s your money.
Credit Cards for Managing Cash Flow
Professional athletes can use credit cards to help manage their cash flow challenges. Basically, you would put all of your normal expenses on your credit card, and then pay it off when you start getting paid again during the regular season. There may be a few challenges with credit cards, however. One, to be approved for a credit card you generally need a pretty good credit score. Two, it is hard to know how much credit you will be granted by credit card companies. If you are planning on using credit cards to help manage cash flow for the entire off season and preseason, 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 the regular season begins.
Plus, credit cards usually have high interest rates, and annual fees compared to other types of financing options. Especially if you have a high balance and are only making minimum payments.
In addition, most people do not know this, credit card companies change their lending standards all the time. And just because you met the credit card companies lending standards when they issued you the credit card, does not mean they won’t cancel it without warning and without explanation. It isn’t unusual at all for people to pay off a credit card they have had for a long time, and suddenly get a notice that their credit card has been canceled. This happens to people every day. The credit card companies decide they no longer want to loan money at certain amounts or to people who pay off their credit cards quickly and they simply close the account on you.
Bank Loans for Managing Cash Flow
You may be able to get a traditional loan as a professional athlete to pay for things like a car or home, but it is harder to get a traditional loan for travel, buying a second (or third) home, a vacation home, or purchasing a business opportunity or for investments.
Banks have very specific lending standards. You will generally need to provide them with two to three years of tax returns as well as bank statements to prove you can repay a loan. For rookie athletes, this can be a challenge.
Banks also have credit score requirements. You might not have well established credit yet if you are a newer team member. And as a veteran player, if you have taken out quite a few loans already, banks are less likely to loan you more money past a certain point. This means that the more money you have already borrowed, the harder it will be to borrow more in the future.
Lastly, bank loans are generally secured loans, meaning they will want collateral to back the loan. This might be real estate, the car you intend to purchase, or stocks and bonds. Banks do not make a great deal of unsecured loans. They normally want collateral. And if they do make an unsecured loan, it is normally 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 are not trying to say anything negative about traditional loans or banks. But for managing cash flow for professional athletes during preseason or off season, traditional loans may not be the best or most practical way to go for most athletes.
Savings for Managing Cash Flow
Using your own savings to manage cash flow may be a real possibility for the disciplined individual. Essentially you would keep enough money in your savings account to get through preseason and off season.
The challenge with trying to use your savings to finance your cash flow is that it does not account for major opportunities that arise. If a great business investment opportunity comes up, you are probably going to need more capital than what you have in savings to finance the investment. The same is true of making major purchases. If a new house comes up on the market and you really want to buy it, chances are your savings are not going to be sufficient.
Very few businesses try to manage their cash flow using their savings. Instead, they tend to rely on factoring (advances), loans, lines of credit, private equity, and selling stocks or bonds. If you think of yourself as a business rather than a professional athlete, making financing decisions like a business will change your perspective on the means and methods for financing cash flow.
Buying Businesses to Manage Cash Flow
Many professional athletes purchase businesses. The cash flow from these businesses can help offset the lack of capital coming in during preseason and the off season. Plus, let’s face it, you aren’t going to be a professional athlete forever. By purchasing successful businesses, you not only help finance the off season and preseason, but you also set yourself up to continue receiving income once your career as a professional athlete is over.
Here are just a few types of businesses professional athletes* own:
- Starbucks Franchises
- Five Guys Franchises
- Auto Dealerships (lots of pro athletes own auto dealerships, like Ferrari and Maserati)
- Restaurants (franchises or their own brand like Elway Steakhouses)
And these are just some of the types of businesses professional athletes own. Lots of 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. The “golden goose” will stop laying golden eggs. 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.
You will notice in the source article that lots of big name players invest in franchises.
The reason for this is because a successful franchise already has a proven business model. They know precisely what you need to do to operate fifteen, fifty, or five hundred locations without spending every moment of your life managing them. So, if you are new to business, buying successful franchises is a wise decision for a lot of people. In fact, 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 answer is, most people simply cannot afford to buy into 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 professional athletes who make a lot of money playing their sport, they have the buying power to consider purchasing really well established franchises.*
Signing Bonus Advances for Managing Cash Flow
If you have a signing bonus coming to you, taking an advance on a portion of your signing bonus can be a great way to help finance the preseason or off season. Here at Balanced Bridge Funding, we often work with professional athletes to provide signing bonus advances. We know the money is guaranteed, so for us, a signing bonus is great collateral to base an advance on. The way signing bonuses work is, we purchase a portion of your signing bonus today for a fee, and then when the team pays the signing bonus, they pay us what we are owed, and pay you the remainder of what you are owed.
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. You don’t want to miss a great investment opportunity just because you are waiting on a signing bonus. You can take out a loan right now and get a lot of your money right away to use for investments, business opportunities, a new home, a new franchise, Etc.
Summary Financing Pre-season and Off Season for Professional Athletes
Most professional athletes are not paid during the off season and do not receive full pay during pre-season play. But they still have bills to pay, kids to put through school, travel, training, a mortgage (and often two mortgages) and more. Without using some sort of financing vehicle to help, professional athletes either have to “go without” or wait until they get paid during regular season.
Cash Flow problems for professional athletes are caused by the “timing” of cash flowing into their bank account versus the “timing” of money flowing out. Money only comes in at certain times of the year, but it flows out constantly to cover living expenses. Any time you have cash flowing out of your bank account on a regular basis, and money only flowing in occasionally, you are bound to have cash flow problems – even if the money flowing in comes in large amounts.
Missed opportunities happen because of being paid at irregular times. If a good business opportunity comes up, or an investment, but you don’t have much cash in your savings, you miss opportunities. Or, if a nice home comes on the market that is in a perfect location close to your training facility, and you can’t put up collateral or don’t have the money, you miss that opportunity – even if you have tens of millions of dollars coming to you in a signing bonus, it doesn’t matter.
Taking out a loan or line of credit is not always the easiest thing for professional athletes to do. Banks monitor credit scores, require collateral, and have exact lending standards that are not always beneficial to professional athletes. This is particularly true for draftees or rookies – banks often require three years’ worth of tax returns proving your income, and you might not have any tax returns to report.
Some athletes attempt to finance the preseason and off-season using credit cards. But credit card fees and interest can be extremely high. Plus, you may not have a credit limit high enough to take advantage of the things you really want to buy. And, most credit cards with extremely high limits, like some American Express Cards, do not let you carry a rolling balance, meaning you have to pay them off by the end of each month.
Athletes often purchase businesses, especially franchises to help keep cash flowing. This also helps them secure cash flow in the future once their career as an athlete is over. Getting loans for businesses can be particularly difficult, but if you take out a contract advance, you can get the money you need right away to purchase a business opportunity.
More Details 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 Athlete 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 Athlete Contract Loan an actual Loan?
Yes, an athlete’s 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.
How Does Balanced Bridge Funding Make Money on Professional Athlete 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.
Case Study : Buying a New House with Contract Advance
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 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, NFL, 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 Here Just Click to Get Started