It has emerged that Coventry City Football Club has had to borrow a substantial amount of money to pay staff wages and to keep the club afloat for the next few months.
The Coventry Telegraph are reporting that next years season ticket sales and revenue from the Football League have been used as security for the money, which is in excess of £1m, just in order to keep afloat.
The move was deemed necessary, not only in financial terms, but also in order to prevent another transfer embargo being placed upon the club so that Andy Thorn could rebuild the squad after the departure of several players during the close season.
The club had their previous transfer embargo lifted after the end of last season and which had been put in place because of unpaid bills, including money owed for a loan player and because the club was late filing of their accounts.
Under new Football League fair play rules and regulations, which Coventry City chairman Ken Dulieu voted in favour of introducing, the move to borrow money in this fashion would be prohibited under the fair play scheme which would only allow teams to spend money tat the club earned.
If the club had taken out the loan now they would be in breach of the recently introduced new regulations and would be placed immediately under another transfer embargo.
So exactly what have the club done? The Football League give each club basic payments of about £2.5m. In addition another £2.2m, in the form of a gift or solidarity payment as it known, is given by the Premier League to Championship clubs. On top of that the club are predicting they will sell about 9500 season tickets which will generate between £3m to £3.5m.
It is this income of around £8m that has effectively been mortgaged to cover the short term costs that will be incurred by the club and all monies generated by season ticket sales will go directly to the loan company as repayments.
With the club still losing around half a million pounds a month despite selling off the only only profitable asset owned by the club, the Prozone sport analysis company set up by former club chairman Ray Ranson for around £4m, the club are clearly deep in financial trouble.
The former vice chairman is thought to have made two offers to the owners Sisu, but they would appear to be unwilling to sell up and lose money on their investment and have been unable to attract extra outside investment.