If you haven’t heard of ‘back door funding’ then look into it because you are going to be hearing a lot more about it in the coming seasons. What is it and how does it work?
Whenever new rules emerge there are always going to be parties that look for loopholes in those rules that create an advantage for that party. Back door funding is football clubs effectively using external revenue such as sponsorship as a way to curtail that latest UEFA fair spending policy.
The policy states that any club wishing to take part in the Champions League and Europa League must be able to prove a balance between expenditure and income through to the 2014/2015 season. With some clubs losing massive amounts of money and some in huge debt, back door funding is a way to create instant income which goes against losses or debt.
The classic case in point is when Manchester City announced a loss of just under £200 million at the end of the 2010/2011 season. In that same summer the club announced a £400 million sponsorship deal for the stadium it plays home games in. This is classed as income and automatically gave City £200 million to spend across various sections of the club.
“Uefa must find the thin line between sponsorship and excessive back-door funding – they must show strength to expel big clubs,” said Borussia Dortmund Chief Executive Hans-Joachim Watzke.
Clubs with wealthy owners are in the best possible position because those owners can use personal funds or funds through their companies to create back door funding which is classed as income in several ways. Therefore, the richest and biggest clubs don’t have to change their policy of spending whatever they like to win trophies because they know that their owners will bail them out via the loopholes in the rules.
The only way to stop this would be for UEFA to either tighten the rules severely or to make an example out of a club. If one of the biggest teams around Europe is made an example of, stripped of assets or some other severe punishment then other clubs will stop using back door funding as a way to get out of trouble.
“No tycoon should be allowed to pump crazy money into a club with sponsorship from five companies he controls. If that happens, financial fair play will fail,” added Watzke.
Since City’s multi-million sponsorship deal UEFA have confirmed they will look into the deal, which is apparently still going on, and they have also confirmed that they will ban any club from the Champions League and Europa League found guilty of breaking the rules or abusing them.
Back door funding is not going to stop until UEFA comes out with a hard line on the issue. Until it does, clubs will keep finding ways to get round the rules, they will keep spending whatever they like to preserve status and the little clubs will be left behind with no chance of hitting the pinnacle of the game.
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