The Player's Request
Shortly after the conclusion of the 2016 MLB season, SSL received a request to secure financing for a Pre-Arbitration MLB player. The Player requested a $325K loan, with the primary use of the funds going towards renovations on the Player’s offseason residence.
Subject to the MLB’s pre-arbitration rules, the Player’s 2017 MLB Salary will likely remain undetermined until mid-January of 2017. Typically, SSL requires a signed contract be in place prior to underwriting any sort of bank-related financing, however, without a signed contract in place, SSL turned toward it’s trusted and highly-esteemed General Counsel to assist them in getting a bank approval in short order.
SSL has an Arbitration Memorandum prepared by its General Counsel, Heitner Legal. The memo provides insight into the total value of the MLB Contract that the Player will sign prior to the beginning of the 2017 MLB Season, along with an overview of the MLB Salary Arbitration process and the applicable qualifications / triggers that made the Player eligible for Arbitration. Based upon the memo, SSL was able to have the Player’s loan request approved by 3 banks within 10 business days.
Educate, Protect, and Expand our Banking Network
“Banks have always had the capability, but not the wherewithal, and certainly not the appetite, to loan money to athletes. This changed for us, since now we have banks that want to do business with us.”
Around the same time of the Player's initial loan request, SSL was approached by a South Florida Community Bank who was interested in learning more about SSL-structured credits. SSL took the time to educate the Bank on its proven athlete-lending process by exposing them to a sample deal, the risk mitigates inherent to contract-based loan repayment, and the oftentimes overlooked intricacies associated with the athlete’s need to borrow.
Bank: "If there's multiple millions paid in signing bonuses and salary since 2013, then the [NHL player's] liquidity is unusually low."
SSL: "It is standard among the industry for players to get taxed upwards of 40% on their annual earnings. The Player is subject to both U.S. and Canadian taxes depending on where he played each game during the season. Depending on any of the pay stubs that you reference in our underwriting package, you will see the Player’s blended tax rate is closer to 45-47%. Also, paramount to understanding the story for any young professional athlete is the '22-year old breadwinner theory’. Many young athletes assume the breadwinner role in their family upon signing that first professional contract. The opportunity to create significant cash reserves is deferred to the athlete's second and third professional contracts, as a significant portion of their initial contract’s earnings evades their own balance sheet for the sake of taking care of their immediate support group."
The Player's Request
SSL received a request to secure real estate financing on a $5.3 million home for an NBA Player who signed a $40 million contract.
The Player, with limited credit history, limited reserves relative to the purchase price, and insufficient tax returns to satisfy national mortgage requirements, had down payment requirements to meet. The Player will not begin to receive the increased salary until November, but he wanted to close before camp starts.
SSL was able to provide the player with a Guaranteed Contract Loan for 104% of purchase price to include all closing costs and fees. We then followed the contract loan with a mortgage on a 30-year amortization at 50% of the Guaranteed Contract Loan, with no payments until 2017.
The Player saved 8% ($410,000) 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.
NFL 2nd Round Draft Pick - Post Draft Loan
The Player's Request
Sure Sports Lending receives a request to secure financing for a 2nd Round Draft Pick who wants to finance his first vehicle, build credit, and retire his pre-draft loan.
Negotiations of the Player’s NFL Contract are just beginning and the Player will not receive a regularly-scheduled paycheck for another 4 months.
Under the current NFL CBA, 2nd Round Draft picks have Guaranteed Bonuses and their salaries for their first two years are fully guaranteed. Furthermore, the minimum rookie salary is $450K. Based upon these facts, Sure Sports Lending is able to provide quick financing for the Player. Funds are wired directly from the loan proceeds to the dealership, and the Player is in possession of his vehicle less than 5 business days from the initial request.
Once the contract was signed, Sure Sports Lending refinanced the loan at 6% APR. Upon refinancing, the principal amount of the loan was termed out over the known-guaranteed portion of the Player’s NFL Contract.
Athletes & Their Businesses
Phase 1: Meeting The Player's Request
Sure Sports Lending is approached by a notable NFL Player's Financial Advisor about the possibility of securing $2M in funding for an off-season business opportunity. Six days later, the $2M request is funded through one of Sure Sports Lending's private lending network affiliates.
Phase 2: Acting in the Player's Best Interests
Under the payment structure of his NFL Contract, the Player will not receive any income until September 2017, when the new season begins. Sure Sports Lending subsequently determines a loan amount and repayment structure which allows the Player to smooth repayment over the 2017 NFL season and cover any additional closing costs. Sure Sports Lending identifies 4 potential banking institutions that have a footprint in the same state of the team in which the Player plays for and subsequently presents them with a full Sure Sports Lending Write-Up (Underwriting Package). The 4 banks compete and 2 formal offers are ultimately presented to the Player and the Player's Financial Advisor.
The Difference: Sure Sports Lending, a Private Banker
Sure Sports Lending prides itself on aligning the short-term needs of the Player with their long-term financial goals. In this Situation, Sure Sports Lending was able to secure over $2M in financing for the Player in less than 10 days. Sure Sports Lending immediately began underwriting in anticipation of refinancing at a lower rate. In less than 2 months, a $2.2M, 12% APR facility was refinanced at 5% APR, providing an estimated interest savings of $20,000. Even more importantly, Sure Sports Lending was able to facilitate a relationship between the Bank and Player beyond just the transaction.
A client of Sure Sports Lending has been making interest-only payments for 14 months on a 34month term loan financed at roughly 11% APR. The Player was set to begin making principal and interest payments the following month, the sum of which were not conducive to his current financial position or the manner in which his MLB contract is structured.
Structuring the refinancing in a way that: 1. Mirrors the Player’s guaranteed stream of income as stated in his contract. 2. Considers the trajectory of the Player’s guaranteed stream of income as stated in his contract. The Player is set to earn $2.9M and $4.4M in 2016 and 2017 respectively.
Sure Sports Lending is able to secure refinancing for the Player with one of its Top 15 National Bank affiliates at 6.25% APR. The first year of the loan is amortized over 3 years while the second year is amortized over 1 year, thus ensuring that the Player’s monthly payments in 2017 are approximately 2.1x the size of those in 2016.
- Access to Bank Network
- Reduction in APR saves Player upwards of $27K over the life of the previous loan
- Loan Customization as it relates to the Player’s trajectory of guaranteed income