The Loan System- Good or Bad?

Football Ball Player Loan System

The Loan System in Football

The loan system in football has been shrouded in controversy over recent seasons, causing massive debate over whether it’s actually a good thing and what can be done to improve or solve the current situation. So, is the loan system a good thing? Who does it actually benefit, the player or the club? And what makes it just so controversial? - Article Written by Danny Hughes (football analyst at football agents).

Advantages of the Loan System

There is no doubt that the loan system has its obvious benefits. Many football league clubs depend on the loaning of players just to be able to have a squad for the season. The loan system allows players to move between clubs on a short term basis, without the need for paying large transfer fees and disproportionately high wages. This benefits clubs lower down the football ladder that have to work on much tighter budgets and therefore can’t afford to pay the necessary transfer fees for players in order to strengthen their squads. Often the parent club will pay a percentage of the players’ wages when loaning them to another club. This percentage is usually worked out by the clubs and the football intermediary representing the player, in order to ensure the deal is fair for all parties. This is beneficial to both clubs as it allows the parent club to lower their wage bill, while the feeder club isn’t paying the player the amount they would otherwise have to, if the transfer were to be made permanent.

Aside from the financial benefits, clubs also benefit in terms of squad building. For the smaller clubs it allows them to fill out their squads and add much needed depth to their small squads. Loanees can be brought in at various points throughout the season, not just during the transfer window; this aids the smaller clubs as they can replace players who pick up injuries throughout the season. On the other hand, the bigger clubs also take advantage of the loan system when building their squad for the season. In the Premier League, clubs are required to submit a squad of 25 players at the start of the season. However most clubs have a lot more than just 25 players, so what happens to those who aren’t included in the squad? Rather than selling them, clubs often loan these players out if they feel they have the potential to benefit the squad in the future and don’t want to lose them on a permanent basis. However this can cause problems, which will be discussed later.

So, the loan system has obvious advantages for the clubs, as shown, but arguably the biggest beneficiaries from the loan system are the players themselves. It allows the players to gain precious time on the pitch whereas they would otherwise be sitting in the stands doing nothing. It is especially helpful to young players who gain valuable first team experience from going on loan to a smaller club, which they wouldn’t get at their own club. It gives them a chance to hone their technical skills and mature physically and mentally because they are playing competitive football against experienced pros, as opposed to playing non-competitive football against players their own age or younger in the U-21 league. For some of the young players regarded as “special talents”, it allows them to develop away from the spotlight and pressures of the big time. There are many examples of this David Beckham went on loan to Preston, John Terry to Nottingham Forest and Frank Lampard to Swansea just to name a few. More recent examples are Jack Wilshere to Bolton and Ross Barkley was loaned to both Sheffield Wednesday and Leeds United. This shows that the loan system works in aiding the development of young players because these players have gone on to become and, in the case of the latter two, will go on to become some of the most talented players in the country.

Loan deals can also help to form relationships between clubs. For example if a player was to perform well whilst on loan and make significant progress in terms of their development; the parent club would be more likely to loan players to that club in the future. So the loan system helps clubs in terms of networking and it also aids football lntermediaries in terms of networking. It allows the intermediaries to form relationships with people and players at their client’s new club.

Disadvantages of the Loan System

Despite the clear up sides of the loan system, there are those that argue the system doesn’t work and is too frequently manipulated and taken advantage of in a negative way by the biggest clubs.

One of the real issues with the loan system is that it allows the big clubs to stockpile players. They buy players that they don’t really need in order to prevent them joining rival clubs, then loan them out to clubs that they don’t consider direct competition. The rules of the loan system don’t allow loan players to play against their parent clubs whilst on loan; this law causes a lot of controversy as many people argue that every other team in the league is in a weaker position than the parent club when facing the club the player has now been loaned to. This was the case when Romelu Lukaku joined Everton on loan from Chelsea. Fans of Chelsea’s rivals argued that it was unfair Lukaku could heavily influence their games against Everton but not when Chelsea played Everton. Therefore strengthening Chelsea’s position further, while ultimately weakening their rivals.

Whilst there are financial benefits for the smaller clubs when loaning players, some argue that it’s a short-sighted approach and that in the long term, the effects of the loan system ultimately cause the smaller clubs to be financially worse off. Because of the loan system allowing the big clubs to stockpile players, they plunder the talent pool at an early age. Therefore, they deprive the smaller clubs of the opportunity to develop their own talent and reap the financial rewards in the long term. So by signing the talented youngsters at an early age for a nominal fee, then loaning them back to the smaller clubs in the coming years are the big clubs really helping the smaller clubs financially?

Comparisons can be drawn between the loan system and what’s happening in the world today with regards to 3rd world countries in Africa for example. By accepting so much aid from richer countries and refusing to use their own resources to develop, have they developed a dependency on the richer countries? The same can be said about the smaller clubs in the country. Do they rely too heavily on the loan system?

Does the loan system actually help players to develop? The feeder club is under no obligation to actually play the player and are often unconcerned about the development of the player because they have no real financial in the player. The player joined for free or a minimal fee and will leave for free at the end of their loan. If the club is seeing no financial return on a player why should they worry about giving him ample game time if he doesn’t immediately improve their first team? Another thing to consider is the quality of coaching the players receive at the big clubs compared to the smaller clubs. Obviously the standard of coaching at the smaller clubs is not at the level of the coaching the players would receive at the big clubs. So is the player actually in a better position at the smaller club when they could be learning from better coaches at their own club? They may get first team football but they miss out on being integrated into the philosophy of their own clubs which could hamper their future at the club.

Controversial Cases

In the summer of 2014, Chelsea sent a total of 26 players out on loan across Britain and Europe and in the case of young left back Christian Cuevas – Chile. This is a clear example of a big club stockpiling players. Chelsea effectively had a second squad of players out on loan. Realistically, how many of these players will actually break through into the first team upon their return to the club? A year on, arguably none and many of those players have once again been loaned out this summer. Surely that can’t be good for their development? Take Josh McEachran for example, since being handed his first team debut by Carlo Ancelotti in 2010 and touted as potential star of the future, he has spent time on loan at Swansea, Middlesbrough, Watford, Wigan and most recently Vitesse Arnhem before joining Brentford on a permanent deal this summer. Has the loan system played a part in his rapid decline and lack of development?

Chelsea can argue that all of their loanees are top class talents with huge potential, who will almost certainly go on to have successful careers at some level of the game. And in the process making a huge profit for the club. But the real question is whether the players’ development is hindered or helped by their sporadic Stamford Bridge careers and whether they will ever actually go on to become the players they could have potentially been.

Another “abuse” of the loan system comes in the case of Watford. They received widespread criticism for the way they used the loan system in the 2012/13 season where they narrowly missed out on promotion. Watford had a total of 14 loan players in their squad that season with 12 of these players coming from either Udinese or Granada. The problem that other Championship clubs had with this is that the owners of Watford (the Pozzo family) also own Udinese and Granada.

Football League rules state that clubs are only allowed to name a maximum of 5 loan players in their match day squads at any one time, with a maximum of 2 players coming from the same parent club. However loans with foreign clubs are classed as transfers so there is therefore no restrictions on these players. Due to their connections with Udinese and Granada, Watford were able to sign a large amount of players without having to pay transfer fees. Is this fair on other clubs in the Championship who don’t have these kind connections?

What Is the Solution?

The loan system is a complicated and complex system so there are no real solutions to the problems it poses. Some would argue that there are no solutions needed because the problems aren’t a big concern or are not relevant to them or their club. But here are some ideas that could help to improve the situation.

As in life, money dictates everything. The loan system is no different. The smaller clubs are forced to loan players because they can’t afford to buy them outright. The big clubs stockpile players simply because they can. And they take their pick of the best young talent around because the smaller clubs aren’t in a position, financially, to turn down their offers.

In my opinion a solution to this would be to address the way prize money and TV money is distributed in the English game. With record new TV deals and more prize money than ever before being made available to clubs in the Premier League; surely the clubs at the top of the footballing pyramid can afford to spare some of this money.  If the smaller clubs had more money, then they would be able to invest in permanent transfers to improve their squads rather than relying on loan deals. Also because they would be in a much stronger financial position they wouldn’t need to sell their brightest young talents in order to remain financially stable. It would also go some way to preventing the big clubs from stockpiling players. With less money available, clubs wouldn’t be able to sign so many players. It would mean they would have to be more selective in their recruitment, bringing only the players they actually need or feel necessary to buy. This means that the overall quality of the league would not decrease because; in fact clubs will be signing only players who should improve their squad rather than just anyone and everyone.

Premier League rules currently state that clubs cannot sign more than 4 loan players per season. However there is no limit on how many players can be loaned out by a club. Maybe by putting a cap on this it would make clubs think twice before signing unnecessary amounts of players because they wouldn’t be able to just loan them out. This means that they would be paying wages to players who won’t be having any impact on the club other than draining their wage budget.

Conclusion

The debate surrounding the loan system will no doubt continue to rumble on for some time. There are, without doubt, clear benefits to the loan system. It definitely does aid players in their development, as numerous cases have shown. However, it encourages stockpiling and unnecessary signings amongst the bigger teams.

It helps small clubs build a competitive squad without having to pay large transfer frees and extortionate wages, but has it created a culture of dependency within the lower leagues? For every positive argument there is a negative to counter it. There haven’t been too many protests from clubs regarding the loan system, from either end of the footballing spectrum, and when there are its usually because the club has been a victim of the complexities surrounding the loan system. But ultimately, the fact remains that, the loan system throws up many questions and maybe they are questions that FIFA and the FA should look at answering.

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