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The bond route
Not all clubs borrow heavily to finance their ambitions. Leeds Utd used an interesting method of raising capital:
Like debt factoring, where firms 'sell' their unpaid invoices at a discount to specialist organisations who then collect payment themselves from the debtors, some businesses raise funds by 'selling' their expected revenues. The way it works is that a business forecasts that it will generate, say, £100 million revenues over the next five years. By accepting a smaller sum of money the firm can get hold of the cash immediately, rather than have to wait for it to roll in over the five year period.
Of course, for the method to work, the firm has to use the funds effectively, perhaps by investing in capital equipment or premises that enable it to expand and make more profit. If the business squanders the money, invests unwisely or is just unlucky, then it may face bigger problems than before. Leeds United Football Club used this method when planning the club's progress. The idea was that the injection of funds was necessary if Leeds were to become as successful as their United counterparts in Manchester.
Leeds raised £60 million in this way, signing a 25-year bond with investors. The club effectively gambled that by spending high sums of money on top quality players, they would be rewarded with Champions League status and the revenues that would follow. The club's inability in the past two Premiership campaigns to qualify for the top echelon of European football calls into question their strategy.