Six Loans for Opening a Gym

Whether you're interested in opening a gym because you love physical fitness or you want to help others feel better, the one constant is that it costs a lot of money to open a gym. You can make your dreams of opening a gym come true when you find the right funding. There are several types of loans for opening a gym available. Depending on your credit and the amount needed, you might want to choose one loan over another. So what are the most common types of loans for opening a gym? 

1. Conventional loans from a bank or financing company
2. Equipment financing
3. Merchant cash advance
4. Seller financing
5. Small Business Administration's (SBA) Loan
6. Line of credit

1. Conventional Loans From a Bank or Financing Company

Many small business owners, including gym owners, are able to secure a conventional loan through their banks or some other lender. These types of loans aren't generally secured with any type of real property, so you can expect to find a conventional loan amount based on your personal credit score, or if you're looking for a loan for an existing gym, the credit of the business.

You might be able to find short-term and long-term conventional loans in varying amounts. If you have good credit, this might be a good option for a substantial infusion of cash to start your business. You can also pay this type of loan off over many years, depending on the terms. In some cases, you might be able to negotiate a conventional loan with ten or more years to pay it off. Without good credit, you may need to look at other types of loans for opening your gym.

👉 Learn more about how to start a gym business in this free guide »

2. Equipment Financing

From treadmills to computers for processing customer payments, your gym requires a lot of equipment. When opening your gym, you might consider the option of financing your equipment. You might finance the equipment through the company that makes it or the retailer that sells it. Depending on the expected lifespan of the equipment, you may have years to pay for it.

However, with equipment financing, you're using the equipment as collateral for the loan or financing. If you default on the terms of the financing, the lender has the option to take the equipment back. While equipment financing is a good option if you don't have the credit for a conventional loan, you may find that you're paying a higher interest rate than you would on traditional financing.

3. Merchant Cash Advance

While this might be a difficult loan for opening a gym, it's a wonderful opportunity for a cash infusion once you open your doors. The lender offers you funds based on your credit card sales. In order to pay back the loan, you promise to give the lender a certain percentage of your credit card sales each day. Typically, your credit card processing company will automatically send the percentage of credit card sales to the lender each day although there are other options available.

You can expect to pay a higher interest rate on this type of loan. However, it's usually a flat rate of interest. Since you don't process the same amount of credit card sales each day, the lender usually charges you a set amount of interest that isn't dependent on the length of the repayment. The amount of money you can borrow is determined by your daily credit card receipts.

4. Seller Financing

Are you eyeing a gym that's already in business and being offered for sale? You might consider talking to the seller to see if they're willing to handle the financing. Instead of you borrowing money, handing the seller a check, and repaying a lender, you pay the owner of the gym payments that include interest and principal over a set amount of time until you own the business outright.

If the seller doesn't need a chunk of cash immediately, this can be a good investment for them. The seller receives more interest than they could hope to earn through other investments. However, if you default on the loan agreement, the seller can take the gym back and sell it to another buyer. The interest rates and length of the loan will need to be negotiated between you and the seller.

5. Small Business Administration's (SBA) Loan

A Small Business Administration's (SBA) 504 and 7(a) loan programs are similar to conventional loans, although they're specifically designed for small businesses, such as a privately held gym. Through these programs, the SBA guarantees a percentage of your loan through a bank or some other lender. This makes it more secure for a bank to loan you money and increases your chances of getting the funds you need to open your gym.

There are strict requirements for qualifying for a loan with the SBA. Also, the 7(a) loan program uses the Prime Lending Index, which means that you pay the prime interest rate. However, it also means that the amount of interest and the monthly payments may go up and down too, although there's usually a cap on the highest interest rate that you'll pay.

6. Line of Credit

A line of credit is a preapproved amount of cash that you can access for your gym. This can be either an unsecured credit line or an asset-based credit line. For an asset-based line of credit, you can put up real property such as equipment, property, and accounts receivable as collateral. With an asset-based line of credit, if you default on your payments, the lender has the option to take the collateral.

Even if you don't need a line of credit to open your gym, it isn't a bad idea to go ahead and secure a line of credit. This makes it easier to access these funds if you have cash flow issues and need to pay bills, including rent, utilities, and payroll. You don't want to waste time filling out applications and waiting for approval when you need money quickly.

At Nexo Fit, we enjoy partnering with gym owners to help them become successful. From insurance to equipment financing, we're ready to help you achieve your dreams.

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