Final Paper/ Powerpoint

Financing Sports

Financial issues relating to sports have dominated daily discussions of government. As the problems continue to change daily, concerns regarding financing professional sports stadium emerge. Making decisions regarding the future of sports requires taking into consideration the maintenance of the stadia, training of players, buying of players, emergence savings, and the source of finance. Generally, the sports world business is interconnected and requires a well-planned decision to avoid losses resulting from cancellations, forced debt repayment, or delays.

Management of funds is a leading concern associated with the process of financing sports entities. Poor management of money implies the failure of the project being funded. Issues of money management on the construction of sports entities involve defining ways in which the revenue gets shared and how current or ongoing operating expenses should be met (Fried, DeSchriver, & Mondello, 2013). In the fund management plan, approaches to managing and servicing debt should specify the repayment period and loan interests (Baade & Matheson, 2011). After the sports entity starts to operate, the revenue generated through tickets should also be used to cover the remaining debt and the rest deposited into saving accounts to strengthen the financial position of the sports club.

Further, funds’ management will require decisions within the club concerning the use of available or acquisition of more funds to maximize club wealth or maximize the general value of the sports stadium (Fried et al., 2013). Good management of funds will require forecasting of future revenues and planning of future costs through calculations of cash flow increases coming from a move to a new stadium or facility. As a result of the forecast, the club should determine how it will increase a payroll (Baade & Matheson, 2011). So, the funding decisions, such as the type of debt financing to use when renovating or constructing a new stadium becomes become critical for ensuring the success of the financed stadium.

Planning is another factor that requires in-depth consideration when financing sports entities. The best sports stadium cannot survive if the financial plan does not support sports efforts. Under the context of planning, financiers need to establish a potential period that sports would take place (Fried et al., 2013). For instance, if sports are to take place early next year, then the club owners should have money or borrow from financial institutions to finance the preparation of the stadium or the facility through having significant renovations (Baade & Matheson, 2011). In general, financial planning in the funding of professional sports stadium is crucial when sports are to be held for a long time.

Filing for bankruptcy protection is a crucial consideration when making financing decisions. The professional stadium for funding does not guarantee success at the end. Failure means that expenses and losses get incurred, thus forcing the financiers to look for lenders to compensate for the loss by paying loans (Drukker, Gayer, & Gold, 2020). For instance, a sports club may file bankruptcy protection to make sure it is safe by being able to pay in time if the project being financed fails to generate projected revenues (Baade & Matheson, 2011). The concern may arise, especially when there is inadequate planning. The business sports world does not provide immunity to debt repayment and any other costs incurred during the financing processes. Most of the built stadia remain almost dormant for some time to the folding of new games or league due to the aggressive marketing commitments of a powerful rival league. Generally, issues in sports world financing stem from poor planning, thus making it necessary to file for bankruptcy protection.

A review of comprehensive internal and external constraints, if not considered, contributes to failure in financing sports entities. Managerial decisions should rely on possible environmental factors such as expenses or risks associated with loans. Some of the internal limitations are club management structure, credit history, and several leagues that a stadium holds (Fried et al., 2013). On the other hand, external barriers such as stiff competition from rivals, unfavorable economic interests, and declined money supply by the government, influence the nature of financing decisions to be made (Baade & Matheson, 2011). If the club has a poor credit history, it is likely to get denied in accessing bank loans or government support, thus becoming unable to finance the stadium adequately. Similarly, stiff competition may make the current financed stadium project non-viable upon its completion, thus creating massive occurrence of losses.

The building of new stadiums contributes to economic benefits. A newly build stadia signifies urban revitalization that sparks the interest of investors in cities with stadia. Since stadia are designed to serve as an architectural symbol, they appeal to tourists and external leagues, thereby generating revenue to pay taxes, players, service debts, and club owners (Baade & Matheson, 2011). However, the newly built stadia contribute to clubs becoming more often than not have to rein in transfer market spending as a means to balance the books (Drukker, 2020). This impact stifles progression and undermines club ability to compete in the Premier League.

Conclusively, planning, management of funds, conducting the review of comprehensive internal and external limitations, and filing bankruptcy protection are significant factors or concerns for consideration when financing a sports stadium or entity. Failure to conduct an in-depth analysis ultimately leads to failure of the financed project, financial losses, and risks of being unable to service bank loans. However, if the concerns are put into consideration, the financed sports stadium becomes successful and increases revenue generation that can pay players, repay debts, and increases sharing ratio among owners.

References

Baade, R.A. & Matheson, V.A. (2011). Financing Professional Sport Facilities. InternationalAssociation of Sport Economists.

Drukker, A. J., Gayer, T., & Gold, A. K. (2020). Tax-Exempt Municipal Bonds and the Financing of Professional Sports Stadiums. National Tax Journal, 73(1), 157-196.

Fried, G., DeSchriver, T. D., & Mondello, M. (2013). Sport finance. Human Kinetics.