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Gym and Fitness Industry Loans

Pre-Qualify for a Business Loan

The Gym and Fitness Industry has seen a large growth spurt over the past 5 years. With people focusing more on personal health be it for personal enjoyment, as a preventive means to stave off the onset of long-term illnesses, or even as a place to socialize the number of gyms and fitness centers across the country grew over 25% since 2010, and it isn't slowing down.

However, many people looking to open fitness centers or fitness franchise operations often overlook the financial necessities to make their dream a reality. Apart from location and buying/renting equipment, gym and fitness center owners also need to have fluid cash for advertising, hiring and training staff, maintaining the equipment, and covering the insurance on the gym and everything in it.

That may seem like a lot to manage when asking for an SBA Loan for a gym or fitness center. However, of the niche small business industries, gym and fitness centers have proven themselves to be quite profitable, so lending institutions are comfortable with working with fitness entrepreneurs in financing new fitness centers and franchises.

Gym and Fitness Industry Loans: Which Loan Product Is Right For Me?

Conventional Loans

Conventional loans offer flexible pricing and terms, as the lenders can often give lower prices for stronger loan requests. Traditional banks and some non-bank lenders typically offer conventional loans, but such loans are not guaranteed by a third party. Because of this, the credit standards on conventional loans are usually higher, and the bank or lenders assume the full risk for the loan.

SBA Loans

Among the more popular alternative to traditional financing, the Small Business Administration's (SBA) 504 and 7(a) loan programs take lead. The SBA back a percentage of the full loan (usually 75%), so that lenders and banks assume less risk in the investment. The SBA requires that all lenders utilizing SBA loan programs adhere to their stringent loan eligibility requirements. This includes the SBA Standard Operating Procedures for loan underwriting. For the popular SBA 7(a) product, loan pricing can be implemented using the Prime Lending Index plus a maximum spread of 2.75% (essentially the cap on the pricing rate). Some lenders may use a variable pricing rate, so that there is flexibility in the interest rate if the Prime rate goes up or down, so will the interest rate on the loan. The terms of SBA Loans are typically structured around the assets being financed.

Asset Based Lines of Credit

Gym and Fitness Centers may opt for asset based lines of credit for any number of business uses. Asset based financing comes in the form of either term or revolving loans secured by assets such as equipment, real estate, or accounts receivable.

Unsecured Business Line of Credit

New gyms and fitness centers may not have collateral to back a loan, and that's where unsecured credit comes into play. With unsecured credit, the lenders assume the risk and establish lines of credit based on the borrower's personal financial strength as well as the needs of the gym or fitness center cash flow. Most unsecured credit loans have very strong qualifications in order for the lenders to assume the risk.

Merchant Cash Advance

A merchant cash advance is financing based on credit card receivables. The lender will offer a merchant cash advance loan based on the fitness center's historical credit card sales. In order to qualify for a merchant cash advance, a gym or fitness center needs to have a brick and mortar establishment, as well as a large large volume of credit card sales. Merchant cash advances are usually considered short-term financing, and can be arranged quickly.

Seller Carry Finance

For buyers looking to purchase an existing gym or fitness center, it may be possible to negotiate financing with the seller. Instead of getting the full selling price from the buyer, both parties usually negotiate the financing terms, payments, and agreed interest rate. The typical terms for seller financing have the purchase paid in full over a three to five year period. The main benefit of seller carry financing is that the seller usually helps with the transition in ownership in order to ensure the success of taking over the established gym or fitness center.

Credit Parameters for Gym and Fitness Industry Loans

Credit parameters can vary greatly between financial institutions and non-traditional lenders, depending on the drive for gym and fitness industry loans.

Most lending institutions like to minimize their investment risk and look at Loan To Value (LTV) which is a measure of available collateral used to back a loan. Given the prospective profitability of opening a gym or fitness center, some lenders may establish the loan amount as low as 55% to a maximum of 90% of the available backing collateral.

Debt Service Coverage (DSCR) is a measure of the available cash flow from the gym or fitness center used to cover loan payments. Lending institutions typically like to see a minimum ratio of 1.25X to 1.35X available cash to the requested annual loan payments. Most lenders like to see a higher ratio, because a larger buffer zone gives lenders some leeway should the gym or fitness center see a dip in sales.

When arranging for financing of any kind, the banks and lenders will weigh the personal credit and financial history of the borrower, which will be directly reflected in the borrower's credit report.

Gym and Fitness Industry: Economic Impact

The Gym and Fitness Industry is a growing market, bringing in over $20 billion in the United States alone. From private clubs to fitness franchises, the gym and fitness industry in the U.S. Has over 50 million members, and that amount is only growing as we lean toward a more health conscious society. With more people looking to exercise in their off time, and stick with regimented fitness, more people are seeking out memberships at gyms and fitness clubs. Financially, this translates to a relatively sound investment for lenders if the business owner is looking to open a gym or fitness club franchise in a given area.

Apply for a Gym and Fitness Loan

Gym and fitness industry loans are widely available, but are dependent on the scale and purpose of the loan. The financing options for gym and fitness industry business detailed above require comprehensive information of the operation or franchise, as well as the business owner which include:

  1. Loan application & a list of supporting documents
  2. Tax records for the business
  3. History of sales
  4. Business plan
  5. Resumes for all owners
  6. Projection of expected earnings

You can easily apply for a gym and fitness industry loan with one of the 5,000 lenders on BoeFly. A single loan request through Boefly is the fastest and most efficient way to seek the gym and fitness industry loan that best fits your operation. Many individual financial lenders and banks can start the loan process, but only BoeFly helps gym and fitness club owners by creating competition among lenders for their business, which in turn gives you a wide array of funding options, pricing, and terms.

Ready to start? Contact BoeFly at 1-800-277-3158 for a free consultation.