Gym and Fitness Center Loans: What Are Your Options?

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Before the rise of COVID-19, the gym business showed every sign of nearly a decade of sustained growth. According to IHRSA, The Global Health & Fitness Association, the industry was experiencing regular growth of 2.5% more year over year, and nearly 74 million Americans visited a fitness center of some kind in 2019.

With the world opening back up, people are headed back to the treadmill. So if you’re looking to be involved in the growing and lucrative fitness industry, there are a few considerations to make before seeking out your funding options.


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Planning for Fitness Center Loans

Proper business funding comes from knowing your specific company and knowing exactly what you need. It seems obvious, but the physical and funding needs of a bakery will be very different from the needs of a state-of-the-art fitness center. So before you run to the bank to take out a loan to fund your fitness dream, you need to make sure you’re clear on what company you’re running and what it needs.

What Kind of Gym Should You Open?

Even before the onset of the pandemic, the fitness business was splintering into innumerable niches and specialties. Your gym should be no different. There are so many ways for you to focus your gym: there are the general large gyms, spinning studios, rowing classes, Crossfit, personal training, bodybuilding gyms, and more beyond that.

Each of those niches requires expertise. What gym equipment does each of these specialties require? If you’re going to become the best bike spinning class in your city, you will need less real estate than a fitness entrepreneur hoping to open a large gym with every option under the sun. If you’re looking to cater to bodybuilders, you probably won’t need as many treadmills as the generalist either, but you’re going to need to buy hundreds, if not thousands of pounds of weights.

Once you’ve decided how you want your gym to feel and perform, you should take the time to consider all the equipment needed. Are you a startup? That’ll require buying even the lowest basics, while a more established gym looking to expand might only need to acquire a few more specialized pieces of equipment. Regardless of which route you’re taking, there are many different ways to fund the project.

Which Parts of the Gym Are You Financing?

Equipment purchases are a gigantic part of starting up a gym, but they’re far from the only expense. There’s also the physical space for your gym, the wages for your administrative staff and personal trainers, if you’ve got them, the marketing to help draw in new gym members, and the expensive upkeep required to keep a gym of any type running.

You’re not necessarily limited to any one type of loan either. If you’re starting up a new gym, you don’t have to find a single loan that’ll provide wages, money for commercial real estate, equipment funding, and working capital. Knowing what you need and being a bit more targeted in your approach will help maximize value. So consult your business plan, think over the goals for the specific loan or loans you’re looking for, and read on to find out about the different financing options available to gym owners.

Types of Small Business Loans for Gyms

Term Loans

These very traditional bank loans are often very simple to picture since they’re the most basically-structured loans to think of. A financial institution provides a particular amount of money to a borrower who monthly payments until the financial institution is repaid in full, with an agreed-upon interest rate added on top. The repayment terms often last years and can have interest rates based on the size of the loan, your creditworthiness, and other factors.

Term loans are very helpful to fitness center owners because they are often large, with low-interest rates (if your credit score is sufficient), and they can be used for a host of purposes within your gym. You can take a bank loan and use it to hire staff to tend to the front desk while also using money from that very same bank account to replace your aging squat racks.

Short Term Loans

Short-term loans work a lot like traditional longer-term bank loans but on a smaller and faster scale. The loan amounts tend to be for less money, to accommodate the fact that they’re often meant to be repaid within a short time frame, often under two years. That short-term nature also means they often have higher interest rates than a more traditional term loan.

On the other hand, many short-term loans require fewer qualifications for the borrower and sometimes will lend to new businesses, not just established companies. If you’re operating a relatively new business in a new location, a short-term loan might allow you to acquire a particularly important piece of equipment or other draw factors for gymgoers.

SBA Loans

SBA loans are term loans given out by private banking institutions, but are guaranteed by the United States Small Business Administration (SBA). For financial institutions, that guarantee means that the loans are much less risky on their end. If the borrower for some reason defaults on an SBA loan, the bank is protected from losing too much money. There are short and long-term SBA loans, they can be pretty large (up to $5 million), and have interest rates as low as 2.25%.

However, because the SBA is guaranteeing these loans with taxpayer dollars, they’re tough to qualify for. The application process is arduous since the government won’t want to hand money to businesses unlikely to repay. So if you want to be approved for an SBA loan, your business basically needs a spotless financial record. It’ll need to show excellent credit scores, several years of income, and more. If you think you qualify to apply to the SBA for one of these excellent loans, you’ll want to take the extra steps to be absolutely sure of it, as approval for an SBA loan can set a business on a huge scale.

Equipment Financing

Equipment financing is an important tool for anyone in the gym business. Fitness equipment is incredibly expensive and some of it takes a beating every single day. If your equipment isn’t properly looked after, you may find yourself needing new equipment a bit more often than you’d like. Going after inexpensive, poorly-made equipment might help with up-front pricing, but you’ll likely need to prematurely replace that equipment and it can be unpleasant for your clients to use, if not outright dangerous.

In equipment financing, the lender holds the newly-purchased equipment as collateral against potential default. If the borrower is for some reason unable to make payments, the lender will simply repossess the purchased equipment and sell it to recoup the value. Having that resale failsafe protects lenders from too much risk, making these loans a fairly safe bet.

You can see why equipment loans are one of the most popular forms of gym financing on the market. Gym owners have to buy a mind-boggling amount of equipment: treadmills, rowing machines, dumbbells, barbells, lifting machines, and more. Being able to buy all of those items in bulk from one source with one loan can help save some funds and simply the process of stocking a gym.

Business Lines of Credit

A business line of credit is effectively very similar to a credit card. You’ll receive a credit limit and can borrow up to that credit limit. The small business owners then only pay back and owe interest on whatever is spent under the credit limit. Lines of credit are excellent options to acquire if you’ve got excellent credit, as you can hold your line of credit in reserve for times of emergency or short-term opportunity with a manageable interest rate.

Merchant Cash Advances

Merchant cash advances are excellent options as gym loans. Except for that merchant cash advances or MCAs, are not technically loans, and aren’t subject to many of the rules and regulations that loans are subject to. Instead, an MCA is the purchase of a portion of future credit and debit card sales. The lender provides cash upfront, and a certain percentage of each and every sale goes back to them until the debt is repaid.

Adding to their difference from traditional loans, MCAs repayment isn’t calculated with interest rates. Instead, they’re calculated with factor rates. A factor rate is a number typically between 1 and 2 which is multiplied by the size of the total advance. That product is the total amount that must be repaid. So if you receive an MCA of $50,000 at a factor rate of 1.2, you’ll need to repay a total of $60,000 (50,000×1.2).

Because these payments are made each day, every time someone pays with a debit or credit card, the payments vary in size depending on how much money you’re making. There are benefits and problems with that system. Varying payment size can be a godsend in lean times, as they’re not taking undue chunks out of your cash flow when there’s not as much cash flow. But when sales are great (and you’re overflowing with members), you’re going to make exorbitant payments, which is why APRs on cash advances are often the highest of any loan options.

Online Lenders

Finally, there are online lenders like iCapital. These lenders are typically able to offer a wide variety of lending options due to their nimble nature. Online lenders can offer long-term loans, equipment financing, and even microloans, and are often able to do so very quickly. iCapital, for example, can get you funding within 24 hours of approval.