The journey to becoming a professional athlete is life-changing–and there are inherent challenges along the way.
Once an athlete declares for and enters the NFL, NBA or MLB Drafts, a new chapter begins. Athletes embark on rigorous training sessions, preparation, in-depth interviews with prospective employers, and extensive travel throughout the country–all before being drafted by an organization that is likely located in a different city or region from where they live.
It’s an exciting process but can be exhausting and potentially expensive.
When an athlete exhausts their college-athletic eligibility and officially declares (and remains in contention) for Draft eligibility, in some cases, their scholarship benefits may no longer exist. Scholarship benefits may include free tuition, room and board. If an athlete chooses to leave school early, they may need to pay for a car or housing in preparation for the Draft process.
Simply put–young athletes, professional prospects and their families may not be able to afford the financial investment required to help launch a pro career. Complicating this further is the reality that some athletes may not have earned any nor enough money during their college years due to their highly demanding athletic and academic responsibilities even before exhausting their eligibility. While college athletes since July 1, 2021 are able to earn money during their college playing years through various engagements and arrangements related to Name, Image and Likeness (NIL)1–which may be helpful in supplementing or offsetting these expenses for some college athletes in preparation for the next level–these cases are uncommon, and financial support is still often needed.
Financial Support at the Right Moment
Our Global Sports & Entertainment (GSE) division offers lending options through Morgan Stanley Commercial Financial Services LLC to help athletes navigate their paths to their first signing bonus or professional paycheck. These unsecured, short-term six- to 13-month loans are meant to cover expenses generated in the months preceding and immediately following the Draft. The money can be used for meals, rent, utilities, travel costs, training expenses, and more at the athlete’s discretion.2
Pre-draft loans may be available to athletes projected to be selected in higher rounds of the Draft and post-Draft loans may be available for individuals who are selected in those rounds.
The post-Draft loans typically represent 5-10% of the athlete’s signing bonus. Loan amounts generally range between $75,000 - $175,000 with an indicative interest rate of 10.08% as of July 10, 2023.3
Simply put–young athletes, professional prospects and their families may not be able to afford the financial investment required to help launch a pro career.
These types of loans can be a better and less risky alternative than seeking funding through other sources, or potentially maxing out higher rate credit cards. It is easy to get started. A Morgan Stanley GSE Director can be consulted to assess individual needs and provide initial guidance. If an athlete qualifies and are approved for the loan, the athlete will open a brokerage account with Morgan Stanley Smith Barney LLC, and the money will be directly deposited into the athlete’s account. One is not required to deposit any other funds into the account, such as a draftee’s signing bonus.
Once the loan has been funded, athletes will have access to a debit card, mobile app and bill pay. Some services and products may have fees depending on usage.4
While athletes who opt to partake in the GSE Loan Program may become a Morgan Stanley client, they are not required to develop an advisory relationship with Morgan Stanley. An athlete can simply partner with Morgan Stanley and GSE to help finance their path to the NFL, NBA or MLB. Other than paying back the loan, however, there are no other conditions nor strings attached.
The Importance of Financial Literacy
Athletes can also take advantage of Morgan Stanley GSE’s robust financial education program.
Designed for an athlete’s unique lifestyle and career, our financial education program can equip and empower them to handle current and future situations by covering relevant topics–such as budgeting, saving, investing, credit, debt, cash flow, establishing financial boundaries, preparing for the unexpected, and navigating the phenomenon of sudden wealth.
Our financial literacy program promotes this initiative by instilling money management principles in athletes at a young age that can last for the rest of their lives.
Additionally, athletes have the option to team up with GSE Directors who have extensive experience advising sports and entertainment professionals on wealth planning and financial management. The GSE Directors may be able to provide practical, seasoned and real-world guidance for emerging talent and their families.
A Morgan Stanley GSE Director can be consulted to assess individual needs and provide initial guidance.
Taking the Next Step
Even if an athlete wants to simply speak with a Morgan Stanley GSE Director for a second opinion about their options, we are here to help.
It is all part of our mission to provide the skills, tools, resources and knowledge necessary to help athletes make smart and sound choices about their finances and future. We urge athletes to think like CEOs and build their teams accordingly–not just to plan for today, or tomorrow, but for the rest of their lives and for future generations.
Are you interested in learning more about our pre- and post-Draft loan programs? Connect with a Global Sports and Entertainment Director today near you.
