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business loans for gyms

Business Loans for Gyms & Physical Fitness Centers

Are you a fitness enthusiast who follows all the latest trends? Maybe you have been practicing yoga for ten years and dream of one day leading your own class. If you want to turn your passion for fitness into a business, you might have thought of opening a small gym or studio. Or maybe you already own a gym or studio, and all your machines and classes are full. It’s time to expand.

The options for entering or expanding in the fitness industry are almost endless. You can lease a small space and buying equipment, purchase a franchise, or open a new site. Existing gym owners who want to grow their business can open another location or try to generate more revenue in their current place.

At Shield Funding we make the process easy to apply online and receive business funding for physical fitness entrepreneurs. You can get started in just a few clicks.

What Do I Need to Qualify?

Below is a list of the requirements to get approved for business funding with our most basic program. There may be additional factors that are considered, meeting these three requirements though gives you a very high chance of having your application approved.

  • At Least 2 Months in Business
  • 500 Min. Credit Score
  • $8,000 Min. Monthly Revenue

How Do I Apply?

Applying has never been easier. You can either call our toll free number 24 hours 7 days a week at
(888) 882-6117
or
Submit your online application by clicking apply below and entering a few basic details about your business.


APPLY

Types of Business Loans Available

After you’ve decided that you want to open or grow your small gym or studio, you will need access to capital. Capital funds the purchase of a new front-desk computer or a massage table. It pays for a renovation to add studio space, or as a deposit on a new space.

1. Bad Credit Business Loans

Bad credit business loans are often one of the easiest ways to access capital. Lenders are willing to work with borrowers who do not have great credit and will lend to borrowers with credit scores as low as 500. They will approve loans in as little as 24 hours and disburse funds within 1-2 days. In many ways, it is the opposite experience of applying with the SBA. Easy, quick, and lenders who are willing to work with you.

Bad credit business loans are not just for borrowers with low credit scores, however. In the lending world, the term “bad credit” is only meant to indicate that you cannot qualify for a bank loan. Given a bank’s high lending requirements, including two years in business, your inability to qualify could be completed unrelated to your credit score.

These loans can be a great choice for lower borrowing amounts, too. If you are opening a one-room yoga studio, you may not need much start-up capital. Bad credit business loans lend amounts as low as $5,000, which is unheard of at a large bank.

Banks tend to lend in larger amounts because loan costs can be the same for a small or large loan, but they make more money on a large loan. It is not cost-effective for them to work with smaller borrowers; to them, a “small” business loan starts at $50,000. The average small business loan extended by banks was $493,000 in 2017, whereas the average size at an alternative lender was a more reasonable $80,000.

2. Small Business Loans

Small business loans have fixed interest rates and fixed payments over the loan’s term. If you struggle with budgeting, a predictable monthly payment is a good choice. Interest rates and terms vary depending on the lender and the loan amount, but at Shield Funding, they range from 12% to 45%.

You can take out a loan for $10,000 to $1 million at Shield, and they will lend to businesses with just two months of revenues. Underwriters can approve a small business loan in 24 hours to 1-2 days, and disburse funds shortly thereafter. Shield requires minimum monthly revenues of $8,000 and a minimum credit score of 500. If you have a once-in-a-lifetime, time-sensitive opportunity to buy a successful franchise or studio, they are an excellent choice for a quick turnaround.

3. Equipment Financing

Equipment costs can be the largest expense to opening a new gym or expanding into a new location. Equipment financing lenders have lower interest rates than many small business lenders. The equipment you purchase serves as collateral for the loan, lowering their risk.

To obtain an equipment financing loan, the lender will require that you provide them information on all the equipment you intend to purchase. This includes whether or not it is new or used, its condition, and possible resell value. Some franchises sell a package of equipment, but the lender might want an independent valuation.

With an equipment financing loan, you might have to put money down. The loan’s term typically aligns with the equipment’s depreciation schedule. New equipment has a five-year, straight-line depreciation schedule.

4. Working Capital Loans

Existing businesses often struggle covering day-to-day expenses. If you have run into cash flow issues paying teachers or front-desk staff, a working capital loan could fill that gap. It provides the capital to keep your business functioning smoothly.

Working capital loans have terms from one to three years. They are often used to cover the costs of continuing to run a business during expansion before the expansion generates revenues.

At an alternative lender, you only have to have been in business for two months and have monthly revenues at or above $10,000 to qualify for a working capital loan. Rates will be between 9 to 45%, depending on your credit score and other factors. Your minimum credit score must be 650.

Growth Tips for your Fitness Business

The State of the Small Gym Industry

The fitness industry in the United States has shown healthy growth for many years. The number of fitness centers increased 6.4% year over year, and revenue grew 7.4% to $24.2 billion in 2014. Memberships have risen 18.6% in just six years, and over 54 billion Americans paid on gym memberships.

While the industry is healthy, the general population is not. According to the CDC, over 70% of Americans over age 20 are overweight, and close to 40% are obese. At the same time, rising awareness and education has led to a higher societal awareness of the importance of exercise to a healthy life. Based upon research about how weight impacts your overall health, many health insurance companies such as Blue Cross Blue Shield are now offering incentives to insured members who visit the gym.

All industry fundamentals point to growth and opportunity, but where should you invest?

Franchises are still going strong. They offer built-in name recognition and take the guesswork out of which equipment to purchase or classes to offer. Options include franchises with pre-designed routines, such as boot camps and kickboxing, or traditional small gyms with treadmills and elliptical machines. Buying a franchise can cost anywhere from $56,000 to $723,000, with the average cost being $319,688. The more expensive franchises are those which require a large upfront equipment purchase.

There are more costs to consider when owning a franchise, however. You will pay royalty fees, which can be a percentage like 6% or a flat fee of $500 and up. Many have contracts of six to ten years, which are difficult to exit even if your business isn’t doing well.

The average revenues for fitness studios in 2014 were around $297,000, but revenues were strongly influenced by size. Fitness centers under 2,000 square feet had an average EBITDA of $57,000, facilities between 2,000 to 5,000 square feet made $88,000, and above 5,000 square feet $109,000. Size matters, and can greatly impact your final profit.

Opening a yoga studio or smaller studio may sound like a simpler and easy proposition, but it’s not without its own expenses. You will need proper flooring, either wood or sprung flooring, to prevent joint damage to practitioners. Mirrors, if you choose to have them, and lighting. Utility bills, particularly if your clientele take showers after class or you offer heated yoga, can get quite high. Do not forget that you will also need to buy blocks, straps, extra mats for drop-in students, and pay your teachers.

Despite the costs involved, yoga is still a profitable business. Americans spend over $16 billion a year on yoga. In just four years, the number of Americans practicing yoga doubled. While you can make a healthy 20% profit margin, you will need to bring in a large number of students per day.

Opening or growing a profitable business takes more than luck, however. A strong business plan and access to capital to support all your initiatives help ensure success.
Existing fitness center or studio owners looking to grow should put some thought into how and why they are seeking growth. Is it because they want to build a chain that they can eventually sell? Do they need to make more money to cover the bills? Or have your existing clientele expressed a desire for other class offerings or more perks?

The reasons behind why you desire growth often drive your plan to get there.

Growing Membership and Class Size

From Day One of opening your gym or studio, driving membership or class attendance should be central to all your plans. Plan on spending marketing dollars on getting the word out about your new business. Offer promotions to new members, such as a free month. Think about offering current members or class attendees bonuses if they bring a friend.

After deciding what type of fitness center or studio you want to open, put together a detailed plan of how you will reach your target audience. Many businesses create a buyer persona, which is an amalgamation of the type of person they think will buy their product. Maybe yours is a thirty-something professional who wants a 45-minute yoga class on her lunch break. The more detailed your member persona, the easier it will be for you to identify where you can find and reach them.

Calculate your break-even point for both the center and classes. This will guide decisions such as when to cancel a class or where to offer incentives to get more people to show up. Then, calculate how many members or class attendees you need to make a profit. Know how your membership numbers impact your profit and set goals accordingly.

Think like a Business Owner

Try to think first as a business owner, and then as a member. Even if you love Vinyasa flow, if those classes are not filling up and your heated yoga classes are at maximum capacity, add more heated yoga classes. Set aside your personal preferences when making decisions about purchasing new equipment or adding new energy bars and drinks.

While you may have followed your passion when entering the fitness industry, now you are running a business. In an ideal world, your fitness center will attract members who also love weightlifting or group step classes. But if those are not the people walking through your door, pivot to cater to their needs. Failing to do so could drive people away.

Think like a Member

But also think like a member. Look around your club or studio through the eyes of someone paying to be there. Dust bunnies in the corner? How would you feel as a paying member if you saw them during downward dog? Cleanliness consistently makes it into the top five things that people look for in a gym or workout facility.

People also hate waiting for machines and get frustrated if their favorite treadmill is always broken. Budget for needed maintenance and repairs, and stay on top of your machine’s servicing schedule. Limit class sizes to the number of pilates reformers you have on-hand so that no one is stuck waiting their turn.

Try to maintain objectivity on your business so that you see what your members see and can fix problems before they cause a drop in membership.

Add Product Lines

Many clubs make a handsome profit margin off selling related but ancillary products. Water bottles, headbands, tennis balls, fitness trackers, yoga gear, selling merchandise can nicely supplement your membership or class fees.

If a member forgets their water bottle, they will buy one from the juice bar. Maybe they want to buy the same racket as their tennis pro. The key is to have multiple profit centers in your business so that you have more than one stream of income. That way, you are less reliant upon membership, and it can be an easy way to grow.

To add a juice bar or retail area, you may have to remodel or add space. Retailers could ask you to pay upfront for merchandise or put money on deposit. This form of growth will require an initial capital investment.

Add Services

Make your gym a one-stop place for wellness. If your members have expressed an interest, think about adding personal trainers. With a small investment in a massage table, you could turn an unused storage room into a profit center. Members join a gym with goals in mind, so when they fill out their membership card, ask them why they are joining. If weight loss is a goal, add nutrition classes or personalized diet and nutrition plans.

While often adding services also means adding staff, you can hire individuals as independent contractors and either pay them a flat fee or take a cut of their fees. Treat them well, and they could bring you clients from other gyms.

Invest in Digital Tools

Studios that rely upon classes to drive revenue should look into investing in digital tools. Most people are unwilling to pick up the phone to find out when the next class is offered; instead, they prefer to look online. Invest in a professional website and scheduling tool that answers all their questions.

Allowing students to register and reserve their spot in class online cuts down on administrative costs. It will not be necessary to have as many people on staff at the front desk.

Digital tools also can produce reports to inform scheduling decisions. If your monthly report shows that attendance at the Wednesday noon yoga class has been consistently dropping, you have now identified a problem you can fix. Maybe the new teacher is not that popular, or the cleaners are not doing a good job sweeping the studio between the 10:30 am and noon class.

Turning a Dream into Reality

Opening or expanding a fitness center or studio takes more than a dream. It takes hard work, planning, and the willingness to learn from and respond to your customers. And it will also take capital. To find out more about working with Shield Funding to meet your capital needs, reach out today.