Dry loan: meaning and explanation

What does dry loan mean?

What does dry loan mean?

Often, when we talk about dry loan, we have found ourselves wondering what it meant and why it is used in a certain area. In this article we will give answers and explain the characteristics of the dry loan, explaining all the most important aspects about this institution.

When we talk about dry loans we mean a financing formula that allows you to enjoy, for a specific period of time, the benefits of an asset covered by the contract. After the time of enjoyment of the asset has ended, the loaned asset is returned to its rightful owner. It is a formula used in football and for this reason, it is important to contextualize the information we are going to provide.

Dry loan is a term that is borrowed from the transfer market and in other sports where it is necessary to move very important sums of money. The dry loan is a term that is used when it is not possible to make investments for an extended period of time on a certain player. This institute, however, does not have any Italian or European regulations governing the right of redemption.

How is the dry loan used?

How is the dry loan used?

As we have already anticipated, the dry loan is a type of financing that is used in football and sports in general. This is a formula introduced by the leading clubs of various football teams, as well as by its agents. In this way, sales but also purchases in the sports market are made more flexible. In this case it will be possible to distinguish three different formulas: loan with redemption obligation, loan with right or redemption option and loan against redemption.

The loan with the right of redemption

The loan with the right of redemption

Born to create the square on the balance sheets, the loan with the right of redemption, is used to divide the expenses over different years. In this way it will be possible to allow companies to make large purchases without affecting the budget money at their disposal. In this way you can make the large purchases due.

This loan is linked to a bonus system which will cover part of the price to be paid. When the contract with the player is entered into, a certain price is established which will be redeemed on expiry. We have, among the simplest formulas, the option of redemption but also the right of redemption, where it will be possible to loan a player against a price to be paid at the end of the expiring contract. In this way the player will have the opportunity to monetize while, the buyer can decide to postpone the outlay of money by evaluating the skills that the player will have.

When it comes to the loan with a redemption obligation, however, the buyer will decide to complete the purchase while the loan against the redemption is circumvented the obligation in the contract.

The redemption loan is used when in the purchase and sale of players. In this way, the player can be purchased for a number of years and then redeemed at the end of the agreed period.

On the other hand, when it comes to the counter-redemption, it is a formula that serves to justify any capital gains obtained. In this way you can decide not to leave the player who in the meantime will have become a resource for the team.

Is the dry loan used for private individuals?

Is the dry loan used for private individuals?

As we have seen, this is an eventuality used in the transfer market and in sports in general, so private individuals cannot use it. What comes close to this type of loan is the rent with redemption and other similar formulas that refer to real estate.

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