In order to finance your gym, you’ll need to vet all options. You already know opening a gym can prove to be extremely profitable. Millions of Americans are considering starting gyms, and many lenders see this as a sound investment. Because not everyone has an extra $15,000-$50,000 sitting in their bank account, financing your startup gym might be a promising way to go about it.
Gym and fitness center loans are out there, but it’s up to you to determine the best way to acquire financing for your new business. If you’re looking for ways to finance your gym, check out this first.
What You’ll Need to Finance Your Gym
First, most lenders won’t consider you as a gym owner without some credentials. Have you worked as a coach, a personal trainer, or a fitness instructor? Good – this shows that you’ve got the incentive to work through the loan. Check out our guide to building a gym business plan that you can use to present your expertise to lenders. You’ll need to be able to back yourself and your business if you’re eager to open up a boutique-style gym.
As we’ve mentioned previously, do your market research. It’s less likely you’ll be approved for a loan if the area is saturated in gyms, yoga studios, and independent fitness centers. If competition is steep, consider venturing into a different business, or be prepared to explain why you’re different. This is something you divulge deeper on in your business plan.
Types of Loans for Gym-Owners
Financing for gyms can mean vastly different things from person to person. It’s all about paying off your new business venture in a short amount of time, responsibly. We’re going to give you a brief introduction to the types of loans you can apply for when starting a gym.
This is a typical loan you may be familiar with – a bank of your choice gives you the lowest rates for an extended term. Rates tend to fall between 1-5% and the payback period can last anywhere between a year and 25 years. With all of these loans, you’ll need to have solid credit.
SBA Loans (Small Business Association Loans)
SBA Loans are an option if you were unable to gain a loan through the traditional bank loan route. The difference? The SBA agrees to cover a portion of the loss if your gym goes under. Your rates will likely fall between 6-8% and terms can last between 3-25 years.
These loans involve essentially gaining the funding through an alternative source in addition to your bank. They don’t require a ton of documentation or amazing credit, but rates are higher between 10-20% and terms are shorter between 1-5 years. You’ll need to pay this one off aggressively.
Asset Based Loans
If your gym goes under, so does your gym’s real estate. You’d only be able to apply for this loan if you own the land the gym/fitness center is placed. In the case that your gym proves unsuccessful, you can apply for this loan and your property would be taken. Rates are high, and terms are short: 10-20%, and 1-5 years, respectively.
Cash advances are quickly approved because they’re less like loans and more like transactions. For that reason, they may be worth looking into. Cash advances involve selling a portion of a company’s future sales or deposits to a lender in exchange for a lump sum. Terms are typically short: 6 months-3 years.
Financing for gyms can become confusing. It’s best to meet with a financial lender to decide what the best way is to pay off your gym. Don’t feel as if financing your gym is a bad route – it’s a smart way of allocating your money to make sure all parts of the gym are paid off in a timely matter.