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The Inside Scoop on NBA Buyouts

Eric Tomasini
Author: Eric Tomasini ·

As the NFL offseason gets underway, one of the tools teams have at their disposal is the franchise tag. But what exactly is the franchise tag, and how does it affect both the team using it and the player receiving the tag?

As the experts in athlete contract loans at Sure Sports, we have an inside look into the world of NBA contracts and transactions. One area that often raises questions is NBA buyouts. Let’s dive into the ins and outs of contract buyouts, how they impact players and teams, and why players who go through a buyout could benefit from the services of a company like Sure Sports.

NBA Contract Buyouts Explained

A buyout occurs when a player under contract and the team agree to prematurely terminate the remaining years on that contract. The player gives up their right to receive their full contracted salary for those remaining years in exchange for keeping a portion of that money.

For example, if a player is owed $20 million over the next two seasons and agrees to a buyout, they may receive $12 million as a lump sum while the team gets cap relief on the remaining $8 million.

NBA Basketball player

Why Buyouts Happen

NBA teams typically agree to buy a player out of their contract for a few key reasons:

1. Cap Space and Financial Flexibility: Buying out a player allows the team to clear that player’s remaining salary from their books, creating salary cap space. This gives them more financial flexibility to potentially sign new free agents or take on salary in a trade.

2. Roster Flexibility: A buyout opens up a roster spot for the team. This allows them to sign a new player, give more opportunities to younger players already on the roster, or simply run a tighter rotation.

3. Rebuild and Reshape the Roster: If a team is in rebuilding mode, they may look to buyout expensive veteran players that no longer fit their long-term plans. This clears salary to prioritize developing younger talent.

4. Change of Direction: Sometimes a buyout happens when there is a shift in team leadership/coaching and the new regime wants to take the team in a different philosophical or stylistic direction with their personnel.

5. Problematic Situation: In cases where there is locker room conflict, lack of effort, or disciplinary issues with a particular player, a buyout may be pursued as a solution to move on.

From the team’s perspective, while eating some salary, a buyout provides financial and roster flexibility to reshape the team as desired. It allows them to trim payroll, open up opportunities for other players, and steer the franchise in a new direction when needed.

The key incentive is creating cap space and roster flexibility, either to reload with new talent or to hand the keys fully to a rebuilding youth movement. As long as the buyout amount makes sense, it becomes an important tool for managing roster construction.

Basketball team championship celebration

Reasons Players Agree to NBA Buyouts

There are several reasons why an NBA player might agree to a contract buyout:

1. Opportunity to join a contending team: For veteran players on non-contending teams, accepting a buyout allows them to become free agents and potentially sign with a championship-caliber team for a better chance at winning a title before retiring.

2. Increased role/playing time: A player buried on the depth chart or in a reduced role may take a buyout to have an opportunity to land with a team that can offer more consistent playing time.

3. Change of scenery: Sometimes a buyout simply provides a fresh start for a player who has fallen out of favor with the coaching staff or has issues with the organization.

4. Financial incentive: In some cases, a player may actually make more money long-term by taking a buyout, signing a new deal, and spreading the remaining money owed over more years for tax purposes.

5. Better situation for the player and their family: Personal factors like being closer to home, leading a preferred system/coach, or living in a desired city can incentivize a buyout.

While giving up guaranteed money from the remaining years on their current deal, the opportunity to become a free agent and choose their next situation is very appealing for many veteran NBA players. A buyout provides control that the player otherwise wouldn’t have unless requesting a trade.

The Buyout Process

NBA Buyouts tend to happen right after trade deadline in February. Players and teams will negotiate the buyout amount based on how much is left on the contract. Once an agreement is reached and the player clears waivers, they become an unrestricted free agent able to sign with any team.

How Sure Sports Can Help Bought-Out Players

Being bought out means forfeiting some future guaranteed money from your contract. However, players can offset this by leveraging the remaining value of their deal through a contract loan from Sure Sports.

Sure Sports contract loans allow players to receive an upfront lump sum payment based on a percentage of the agreed upon contract buyout. This provides financial flexibility and peace of mind as they navigate finding a new team.

For example, if a player has $25 million remaining on his contract, he could agree to a buyout that pays him $18 million. This scenario leaves $7 million on the table as lost income. Even considering the player is now free to sign with the team of his choice, that contract is not likely to come close to the money forfeited as part of the buyout. However, Sure Sports could provide up to a $4.5 million dollar contract advance to provide some up-front capital, allowing the player to invest those funds in a business or passion project immediately.

Sure Sports has extensive experience dealing with the complexities of NBA contracts and buyouts. They are, in-fact, the go-to resource for players going through the buyout process. Contact Sure Sports today to learn more about our athlete contract loans and how we can help achieve your goals on and off the court.

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