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Leon C. McKenzie: When Professional Athletes Need Loans, They Look To The Man Behind Sure Sports Lending

Tyler Endebrock

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This interview is presented to you by the University of Nebraska — Lincoln Master of Arts in Business with a Specialization in Intercollegiate Athletics Administration

By Tyler Endebrock, @tjendebrock

 

Leon C. McKenzie, President and Founder of Sure Sports Lending

Leon C. McKenzie, President and Founder of Sure Sports Lending

When you walk into a lending company’s office, you would not often expect to see walls full of signed NFL and NBA jerseys, hear ESPN’s “First Take” in the background or watch a 6-foot-10-inch NBA power forward taking pictures with the company’s employees. However, on any given day in the Sure Sports Lending (SSL) office, you might see just that. Front Office Sports is proud to have sat down with Leon C. McKenzie, President and Founder of SSL, to discuss his journey to creating one of the most niche loan practices in the country.

McKenzie attended West Chester University of Pennsylvania, not far from where he grew up, and received his finance degree before heading 25 miles east to Villanova for his MBA. His father was a high school math teacher, which led McKenzie to initially try his hand at teaching. It took no time for McKenzie to realize his passion was in money.

“I started out as a secondary education major in college, and I quickly found out I like money a lot more than I like kids. After school, I worked as a financial analyst for a couple of large real estate companies, and then I was given the opportunity to work for a bank that was doing large loans within commercial real estate. I learned a lot about the credit side, but I don’t think I was ever really built to be a banker. The nine to five banking stuff just wasn’t my jam, since I always had ‘the party starts when I get there’ mentality, so I went out on my own for a little bit and kind of bounced around doing some consulting projects.”

“Shortly after moving to South Florida, I was approached by a professional athlete who needed a loan, and he was having a hard time getting it through the banks. By complete accident, I was able to put together an extremely sound structure for banks to be able to loan money to athletes. After about three months of work, I got the athlete a $2 million loan based on this structure.”

Athlete lending was not a thought of McKenzie’s when he first entered the financial world. When McKenzie was younger, he aspired to be a professional athlete. Once he realized he had no professional future playing sports, he always thought of sports as just entertainment. However, when he met his then girlfriend, now wife, he told her he would enjoy finding a way to combine his two loves: money and sports. As McKenzie looked more into it, he saw the athlete lending industry was incredibly under-serviced. He had a vision to show that athletes are regular people too, and they need loans just as much as anyone else.

“In my banking meetings I often tell the bankers, ‘Athletes are like strippers: They are great to look at, but no one wants to do business with them.’ People love to go and watch their buddy play football and then go have a drink with him in the VIP section, but once the player says, ‘Hey, I want to buy a house,’ their ‘friend’ wants nothing to do with them. That sort of negative perception has catapulted our business. Banks have always had the capability, but not the wherewithal, and certainly not the appetite, to loan money to athletes. This changed for us, since now we have banks that want to do business with us.”

McKenzie’s vision started to become a reality, and he began creating a company that would underwrite loans to athletes, based on the athlete’s contract. Depending on the loan request and how quickly the player needs the loan, the entire process can reach completion in as little as 72 hours through private investors. If the priority of the loan is cost rather than time, the loan process reaches completion in about a week through a bank (McKenzie discusses both the private investor and bank loan processes later in the interview). Under McKenzie’s tutelage, the company continues to try and perfect their craft each day.

“The goal was always to be the lowest-cost provider for a loan. Now, the goal is to be the best, fastest and cheapest provider of loans to athletes. Prior to the economic downturn, and before I incorporated my company in 2009, banks would throw money to anyone. However, athletes were still borrowing from predominately private lenders at 18 to 34 percent. I remember on my second or third loan, the player took my loan package to a banker, but the banker wouldn’t accept it and said, ‘This is too good to be true.’”

“People think athletes don’t need to borrow money because they don’t fit into the conventional lending guidelines, but that’s not the case.”

— Leon C. McKenzie

McKenzie credits strong planning and a good amount of luck to starting his business at the time that he did. Real estate investors and displaced bankers were standing on the sidelines with money to invest, and they were looking for high returns. He was approached by multiple investors interested in lending to athletes for around 30 percent.

 

Leon C. McKenzie with TV personality and former NFL player Merril Hoge at the Sure Sports Lending Annual NFL Combine Cocktail Party.

Leon C. McKenzie with TV personality and former NFL player Merril Hoge at the Sure Sports Lending Annual NFL Combine Cocktail Party.

“I did one at 24 percent, and I showered for about a week straight afterwards because I felt so dirty. It was terrible, so I tried to build up my bank network, while also having some private investors. That’s when I really started what came to be our current business model. We found about three to five different banks in every sports city, which were banks that had 3–10 branches per bank. They are just big enough that it isn’t like you are walking into someone’s living room, but they are small enough where I could meet with the bank president and the credit officer. It is great because the athlete is doing a lot of good for that bank, and then he is treated like family when he comes in.”

“The big missing piece for these loans was insuring the contract, and now we have three or four main insurance companies for the loans. These smaller community banks are comfortable working with our insurance companies. Now we have a network of almost 175 banks, so when a player needs a loan right away, we can get him his money from our investors, then get him into a bank soon thereafter at a better rate. Our average loan rate for all the players we have done in the last year is at about seven percent. Even if they need the money right away, we can get them a maximum 12 percent annual rate with our investors, then get the loan refinanced three weeks later with one of the banks.”

McKenzie is very happy with the amount of sophistication the company has added to the loan process just in the past few years. He credits the smoothness of the process to his current team and the talent he continues to bring in to the office. They have everything down to an exact science, and they even have contests to see if the loan closing can finish faster than the previous one.

SSL now provides loans to NFL, NBA, MLB, NHL and MLS players. However, it is not often that the company gets a “lead” from the athlete himself. SSL mostly works with financial advisors, agents, business managers, etc. to get the athlete the money they need.

The company can provide pre-draft loans to NFL and NBA athletes (they are working on fine-tuning pre-draft loans for MLB) who need the money to train and get their lives in order before they sign with a team. The pre-draft loan amount is determined by the player’s projected draft slot from multiple draft boards. Once a player signs a professional contract, they can come to SSL to get a contract loan, based specifically on that player’s unique contract. The company also created the “McKenzie Mortgage,” which gives players the chance to receive a favorable mortgage (up to 110 percent financing) on their home, even when they are not getting paid. If the player is not getting pay checks until the season starts, he does not have to make payments on the loan until then.

To initiate the entire loan process, SSL needs to have the player’s contract, which they hand over to Darren Heitner and Alan Wilmot at Heitner Legal to examine the contract and make sure there will be no issues. Based on the contract examination, a player can borrow up to 30 percent of a guaranteed contract and 10 percent of a non-guaranteed contract. Once the contract is examined, SSL starts the underwriting process by customizing the term sheet depending on the contract. They request documents from the athlete such as pay stubs, tax forms, bank statements, driver’s licenses or even a 4506T in place of tax returns.

SSL will then decide if the loan needs to be done in-house or with a bank. If it is the latter, SSL will utilize one of its affiliated banks in the player’s city they are playing, or where they grew up/played college ball, so they have a connection to that bank. From start to finish, SSL can close a loan with a bank in about a week, and they have the ability to close anywhere in the country via webcam.

McKenzie understands that there is somewhat of a negative stigma with athletes needing loans and lending companies providing those loans. To that, he says there are a host of reasons to have athletes take out loans. One, these loans are a way for kids coming right out of school to build credit. Two, he believes that players should let their cash work for them and outperform what they are paying for interest. He mentioned there is a soft-spot in his heart for helping kids who did not have much money growing up.

“Executives in media companies making $500,000 per year can walk into a car dealership and buy a $200,000 car, no problem. We have athletes signing a four-year, $40 million contract out of college, and if they want a $200,000 car, they need to walk into the dealership with $200,000 cash. So what happens is these guys, who don’t know any better or weren’t raised in that environment, will go in with a wad of cash to buy a $200,000 car. It’s frustrating that these kids are making money, but they have to carry loads of cash to buy anything. I want to see people getting out of that mentality and building credit. It is dangerous to carry cash like that, and building credit is much better for these kids in the long run.”

 

Leon C. McKenzie and his SSL team have found their niche and excel at it in the #sportbiz.

Leon C. McKenzie and his SSL team have found their niche and excel at it in the #sportbiz.

“People also don’t seem to understand that this is just like any other job. You don’t walk in, finish the interview, get the job offer and get cash slid across the table to you. You leave with the same amount of money you came in there with. Some leagues may provide moving stipends for the players, but most of these kids make money only during the season. When they aren’t making money, especially before they begin their careers, they need these loans to get by and live the life they want. When athletes like LeBron James or Dwayne Wade already have accumulated assets, everyone wants to be their banker. The hard part of banking is taking them through their career while they are earning their money.”

“I like to brag about having four rookies per year over a two-year period, and it’s very rewarding for me to help these guys out. And these guys are good. SSL’s all-star team would beat most agent’s all-star teams, and pick any sport you want. These are good players, and it’s easy to see what’s on the come, but our loans are not speculative. Our loans are paid off on what’s known. The opportunity to be a banker and help these players work through is why these community banks we work with are killing the big banks. Three years after the initial loan, the player has his $600,000 loan paid off, with $2 million in the bank, and knows everybody in that bank. It wasn’t until 2013 or 2014 that I saw how much these loans meant to both the player and the bank, and watching the relationships evolve is incredible.”

For McKenzie, another rewarding part of this business working with international players and forging relationships with their agents to allow the players to have money once they come to the States. Most banks do not understand the process for players coming into this country to play sports, but SSL is able to help the players get money that no one else could get them, just by having the patience to work on all the waivers needed.

As far as the future of the company, McKenzie says the sky is the limit. They have seen a huge growth in the McKenzie Mortgage, and they have also seen a huge spike in business loans to the athletes, such as start-ups and investments. They are beginning to tap other markets, and they are taking away the $75,000 minimum loan requirement for MLS, which they hope will continue to add to their strong relationship with the soccer leagues, including the English Premier League.

“Right now, I’m proud to say we are heads and shoulders above the competition, and it is my goal to figure out how to keep that lead and expand on it.”

Front Office Sports would like to thank Leon C. McKenzie for taking the time to share his knowledge of the sports lending industry and his journey. You can find him on LinkedIn, and follow him on Twitter.

To learn more about Sure Sports Lending, please visit their website at suresportslending.com to further understand the athlete lending process, read case studies about SSL and read up on Leon’s non-profit public charity called the McKenzie Promising Futures Fund. If you would like to follow SSL on social media, check them out on Facebook, Twitter, LinkedIn and Instagram.

This interview was presented to you by the University of Nebraska — Lincoln Master of Arts in Business with a Specialization in Intercollegiate Athletics Administration

Tyler is a contributor with FOS. He recently graduated from the St. Thomas University School of Law, where he received a joint JD/MBA in Sports Administration degree, and received his undergraduate degree from the University of Florida. He has held positions with Select Sports Group, Sure Sports, the University of Florida Athletic Association, Gatorade, and more. Tyler can be reached at tyler.endebrock@gmail.com.

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Decoding 2.0: Receptivity Theory and the Power of Niche Sponsorship Strategies

New study unveils unique findings when it comes to sponsorships.

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Earlier this year, global lifestyle marketing agency MKTG and sister agency, marketing analytics company, SRi, released The Receptivity Story, as part of Decoding 2.0.

Decoding 2.0 is a unique study, as it acts as one of the few sponsorship-specific studies in the industry. To date, it is also one of the most intensive ones as well.

There’s a ton of great stuff here, but I’ll focus on a couple of my favourite findings, and one thought:

  1. Receptivity Theory
  2. Niche Sports
  3. Firm-Level Differences

Receptivity Theory

Initially unearthed in the original Decoding study in 2012, Receptivity Theory is the idea that, more than the passion associated with a property, the receptivity of fans towards branding is more predictive of sponsorship success.

While this seems like an intuitive finding, the industry, without the necessary data, could only use passion or exposure as a proxy for predicted success.

Really — what we are doing here is shifting the inflection point. Rather than having brands place a premium on number of passionate fans, we can now shift to a brand-specific view, where meaningful attention to branding is being measured.

Niche Sports

Through this study, SRi discovered that there are three types of fans: Receptives, Selectives, and Non-Receptives. Niche sports, which suffer from a lower total number of fans, benefit from a greater percentage of Receptive fans.

From a sponsor’s perspective, the math here has always been simple: would you prefer to reach many, but impact a lower percentage? Or, alternatively, would you prefer to reach few, but impact a greater percentage?

What’s easy to determine is relative exposure at the extremes — i.e.: the NFL is clearly more popular than swimming. The middle is more difficult to measure, and even tougher, the relative willingness to pay of fans.

For instance, assume the following, for average brand X:

  • Sponsorship for Sport A will reach 1,000 fans per game, with fans, on average, valuing branded sponsorship at 1
  • Sponsorship for Sport B will reach 500 fans per game, with fans, on average, valuing branded sponsorship at 2

Under this scenario, if return is value, X would be indifferent between the two options at the same price.

Scenarios like these are where receptivity is powerful. It provides perhaps one of the best estimations of reach — just because your branding is at a baseball game, does not mean that everyone will see it!

In addition, it lays the groundwork for potentially being able to measure predicted value of sponsorship, or “willingness to pay” — which would vary, whether you are a Receptive or Non-Receptive fan.

Borrowed from economics, willingness to pay is the idea that each consumer has a maximum price that they are willing to pay for a good. For this application, I will treat attention as price — the scarce resource.

Thus, the equation becomes closer to this:

Where i would act as categorical variable for category of fan. n would represent number of fans falling within the given category. Return would represent willingness to pay.

Because fans are heterogeneous, the brand will experience a different return for each “unit view” — meaning that even if one person’s receptivity differs from another, there will be subgroups within categories of fans, separated by willingness to pay. While we can assume that the return from a Receptive fan will be greater, meaning that variable return exists, we would still be uncertain as to the degree that this exists.

Importantly — this study clearly shows a greater percentage of surfing fans falling under the “Receptive” category than the NBA, but does the willingness to pay for Receptives, Selectives, and Non-Receptives differ between the two sports? It’s still early, and there will be ongoing studies, but these are questions that immediately come to mind.

One interesting note: if receptivity proves as powerful as this study suggests, it may become an arbitrage opportunity for the first brands who successfully adopt it. And, while the long-run equilibrium should theoretically be one in which all brands adopt this strategy, it may take some more time for sponsorship to get there — meaning that the early adopters could reap massive gains.

In speaking with Julie Zdziarski, VP of SRi:

“Brands do recognize that the scope is much smaller. But the key piece here is that the smaller sports are more lifestyle focused… they’re a more intimate environment”

Firm-Level Differences

Plenty of this is dependent on the firm, as well. In my earlier example, I assumed that a fan’s assigned value for branding (or willingness to pay) being greater was always a good thing.

For some firms, this isn’t necessarily true — and in fact, many firms pursue strategies in which they are unconcerned about reaching high-value customers. This leads to an advantage in number of customers, rather than one in revenue per customer. Think Google, or the telcos.

For these firms, receptivity still matters. Even if you want to be everywhere, you want to be sure that people are noticing you. But what matters less is the degree to which fans are willing to pay, whether they are Receptive or not.

Good Data Is Always Good

In an industry that suffers from a dearth of public data and dispersed data sets, this study acts as one of the true landmark pieces of research.

But here’s the thing: marketing data is tough, and it will never be as easy as it is in industries like finance to find information. And that’s why stuff like this is important.

To be sure, firms like MKTG enable people like me, who study the industry, to make better and more informed analyses, but it also benefits companies and other stakeholders. And understanding the consumer does more than just help brands make money — it provides consumers with an opportunity to gain more as well: leading to (hopefully) an optimal outcome.

It’s still early days, but MKTG has promised to release more stories in the future. When it comes to research and available data, sponsorship looks more promising than ever.

 

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Building Brands Through Content

A deep-dive webinar presented by INFLCR that takes a look at how some of the biggest names in the world are using content to build their brands and bring in endorsement deals along the way.

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A deep-dive webinar presented by INFLCR that takes a look at how some of the biggest names in the world are using content to build their brands and bring in endorsement deals along the way.

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College Football Playoff Turns to Exclusive Packages to Deliver for Fans

The Playoff Premium service gives fans the chance to experience once-in-a-lifetime opportunities.

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*The College Football Playoff is a proud partner of Front Office Sports

Next to the Super Bowl, the College Football Playoff National Championship has become the most sought-after ticket and eagerly-anticipated game day experience in football.

With a showdown of this magnitude comes the opportunity to deliver activations fans can’t get anywhere else. To do this, the College Football Playoff has turned to Playoff Premium, a service that creates unique experiences including everything from sitting in a game day suite, to pregame hospitality, to the opportunity to go on the field after the final whistle blows.

According to a 2017 survey from Populous and Nielsen, two in three fans want a unique experience and are willing to pay extra for it. Given that immense demand, the CFP knew they had to, at the bare minimum, give fans the option to receive more. Playoff Premium was born.

“When the College Football Playoff was created, there was a conscious effort to make sure that we had a product that could accommodate fans, whether they were individuals or part of companies that wanted to come and have a more than normal experience at our National Championship game,” said Alfred White, Senior Director of Marketing and Strategic Partnerships. “That’s Playoff Premium – exclusive packages that allow fans to experience the weekend of activities in new and exciting ways.”

Last year in Atlanta, packages sold out quickly.

“Last year was very successful for us. Our packages sold quickly,” White said. “Unfortunately we had to turn potential buyers away. There is only so much inventory and the demand for this game is now off the charts. College football is more popular than ever and fans want to be there when the confetti cannons go off.”

The momentum should only increase as the College Football Playoff National Championship heads west the first time.

“I’m excited to have a game purely on the West Coast,” White said. “We’ve gotten a great response already. The Bay Area and football — what better way to start the New Year.”

With a new coast comes a new set of challenges, but also a new set of opportunities — the biggest being able to deliver experiences tailored directly to the location of the game. Among the unique offerings this year, a gifting suite that will look similar to what the players experience during the week leading up to kickoff.

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“Our top-level package holders typically get a gift bag as part of their purchase,”White says. “This year, we’re going to do a gift suite. When our clients are at the game or at their pregame hospitality, they will be able to go to a designated area and there’ll be multiple gift options that they can choose from. We will have a point system and everyone who buys a package will be given a certain amount of points to ‘shop’ with.”

Once in a lifetime opportunities are always prized. With the CFP doubling down on its Playoff Premium service and its capabilities, expect to see the continued growth of moments that allow the fans to get closer than ever before to one of the most iconic events in all of sports.

*The College Football Playoff is a proud partner of Front Office Sports

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