Limited Options Turn Deadline Day Deals Into Expensive Mistakes

Bad Balance sheetsThe usual madness surrounding the football world goes into overdrive on 31 August as clubs battle to sign players on hugely inflated fees and wages in the hope of improving their squads.

To the outsider the whole practice is bizarre; failure to prepare over a period of months boiling down to a few rushed deals with crazy money changing hands, particularly for British players it seems.

It is market forces that determine how much is forked out for the likes of Andy Carroll, plus a four year contract with wages equivalent to the GDP of a small nation – if you choose to limit your options to a predefined market.

In hindsight, Liverpool could have spent a fraction of the money on a foreign player from a less well-known team, paid him a much smaller wage and sold him on again with minimal losses if the deal didn’t work out. That would be a more prudent approach that considers balance sheet implications down the line.

There are certainly similarities with the business finance market.

If businesses limit their financing options to the well-trodden path (banks), they can find themselves with an expensive product that is draining cash and incompatible with their business plan in a couple of years, akin to an Andy Carroll or Robinho, as anyone who was sold an interest rate swap agreement (IRSA) will testify to.

Horror stories are starting to emerge of SME owners repaying huge amounts just to exit these agreements, and Barclays has set aside £450m just as contingency for compensation payments. If it’s anything like PPI, that looks conservative.

So the lesson should be for profitable companies who want to take their business to the next level to widen their options and look at crowdfunding.’s business model allows solvent companies to borrow between £2,000 and £50,000 over a six month to six year period at rates that are typically lower than those offered by banks.

And repaying the loan is simple, straightforward and agreed upfront so you can get on with your business without fearing a sting in the tail.

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