Perhaps you want to start a gym. Perhaps you want to fund an expansion of your current gym business. Whatever your plans, you need money to fund them.
Gyms are capital-intensive businesses. You need to find a space, fit it out, decorate it, and fill it with equipment, and you’ll often need to do all this before you generate a cent in revenue.
Given the upfront costs, finance is key. In this guide we’ll walk you through the forms that gym loans and financing can take, and how to secure the money that you need.
What is gym financing?
Gym financing is a term that describes the funding options available to gym owners and fitness entrepreneurs who are looking to start, expand or maintain their gym business.
You may be able to self-finance your gym if you have access to the necessary funds, but gym financing more often involves securing loans, signing leases or potentially attracting investors.
What are the different gym financing options?
Gym financing can take a number of different forms. Beyond using personal savings to finance your new gym business, you can gain access to the necessary funds through the following financing options.
Bank loans
The most common gym financing option is a business loan from a bank or approved lender. If you are eligible for such a loan, you can gain access to all the capital you need, on fair terms, from a trusted lender.
But eligibility can be a sticking point, particularly for new businesses, as you may need to prove your ability to pay the loan back, but you may not have built up the financial history that the lender requires.
- Best for: Gym owners with a solid credit history seeking large amounts of capital with structured repayment terms.
SBA loans
The Small Business Administration (SBA) is a US government agency tasked with supporting small businesses. One of the key ways it does so is by guaranteeing a portion of certain small business loans, which reduces the risk for lenders and allows them to offer lower interest rates and more flexible repayment terms.
Once again, eligibility can form a sticking point for SBA loans. You need to investigate alternative financial resources first, and if none are available, you then need to have reasonable owner equity investment, and you’ll need to meet the SBA’s size standards for small businesses.
- Best for: The owners of eligible small gyms looking for a loan with lower interest rates and more flexible terms.
Equipment financing
Equipment financing is a loan that is used for a specific purpose: to finance the purchase of gym equipment. The lender retains ownership of the equipment until the loan is fully repaid, at which point ownership transfers to the gym.
The main perk of equipment financing is that there are generally fewer hoops to jump through. The equipment itself serves as collateral, which reduces the risk for the lender, so the eligibility requirements are lower for this type of financing, making it more easily accessible.
- Best for: Gym owners who require specific equipment, and who may be struggling to secure finance.
Leasing
Leasing sees you rent your premises or equipment without ever owning it. You make regular payments (usually monthly) over a set term to the lessor for access to the premises or equipment, then hand it back when the lease ends.
While this is the go-to financing option for commercial property, it can also make a lot of sense for fitness equipment too, as many gyms will want to offer the latest and greatest equipment to their members. And leasing allows you to sidestep loan eligibility requirements.
- Best for: Gym owners who want to regularly rotate their equipment offerings, or who may struggle to secure a loan.
Angel investors and venture capital
Are you an ambitious fitness entrepreneur? Are you hoping to build a big gym franchise or fitness center brand, with locations across the state, country or world? Your best bet might be financing from an angel investor or VC firm.
Angel investors and venture capitalists are best known for getting in at the ground floor of tech startups, but they also invest in and guide more traditional companies too, including fitness businesses. But they’ll want to see a healthy return on their investment of time and money, so this type of loan is not for the faint of heart.
- Best for: Ambitious gym owners seeking external investment to rapidly scale or expand their business.
Crowdfunding
Rather than accessing a business line of credit, you might consider opening a gym through crowdfunding, through sites like Kickstarter, GoFundMe or Fundable.
Crowdfunding has plenty of pros. Along with generating that much-needed capital, it’s a great way to validate your market, and it can help you build a loyal customer base that is engaged with your business from day one.
But there are risks too: there’s no guarantee of success, you’re ripe for scrutiny if you don’t do exactly as you’ve promised, and if you choose an equity crowdfunding model you can seriously dilute your stake in the business.
- Best for: Gym owners who plan to serve a specific community, and are more focused on people than profit.
How do I create a gym business plan?
Creating a business plan is a critical step in understanding the financing needs of your commercial gym venture. The following elements make up a basic business plan, which you can then use to estimate the cost of opening a gym:
- Executive summary: Create a document that describes the gym concept, the mission and goals of the business, and your unique selling points (USPs).
- Market analysis: Research your target audience, your competitors and current workout trends to identify fitness business opportunities.
- Business model: Define the services that your gym will offer (memberships, classes, personal training) and other potential revenue streams (product sales, fitness equipment hire).
- Financial plan: Identify your startup costs - the initial investment that you’ll need to make before you open a new gym, such as leasing a building, renovating and decorating, and buying equipment. Begin to source a bank loan or other form of financing to cover this initial outlay. Calculate both operating costs (including loan servicing) and revenue projections to find the break-even point: when you cover your expenses and begin to make a profit.
- Marketing strategy: Plan how you’ll attract and retain members, including paid advertising, organic marketing like SEO and social media, and initial promotions to win early business.
- Operations plan: Create a plan for the day-to-day running of the gym, including staffing, scheduling, systems and processes.
- Risk management: Identify potential risks, such as fierce competition, financial challenges or on-site injuries to staff and members, then create strategies to mitigate them.
How do I manage financial obligations as a gym owner?
Once you get a loan to cover the cost to open a gym, how do you ensure that initial injection of capital is spent wisely, and is used to grow your business? Responsible management of business funding is about ensuring all ongoing costs are comfortably covered, and investing in the areas of your business that will generate the greatest returns.
You can better manage your financial obligations, and set yourself up to make more money, by:
- Creating a detailed business plan: Use the list above to create a plan that considers all the fixed and variable costs of starting and operating a gym.
- Borrowing from trusted, established lenders: While there may be more paperwork involved, a business loan from an established bank will offer far better terms than a non-business loan from a less conventional, less established lender.
- Offering pre-sale memberships: You can begin to generate income before you even open by offering special deals to earlybird members.
- Using membership tiers: Attract a wider range of members by offering a number of different membership options.
- Offering additional services: While memberships will be your bread and butter, use value-adding products and services to enhance your bottom line, including personal training, fitness classes, merchandise sales and more.
- Monitoring expenses: Constantly track your spending to ensure you’re working within your established budgets and you’re avoiding unnecessary costs.
- Negotiating with vendors: Spend time shopping for and negotiating the best possible deals from your suppliers on equipment, services and supplies.
- Building an emergency fund: Set aside cash reserves for unexpected expenses.
Start your gym journey right: invest in the best gym management software
Once you’ve secured financing for your gym business, you need to direct those funds where they’re needed most. And perhaps no single investment will be as impactful to the operational side of your fitness business than gym management software.
And at GymMaster, we’re confident that we offer the very best gym management solution that the fitness industry has to offer - and thousands of gyms across 110+ countries agree.
But you don’t need to take our word for it - test us out for yourself with a GymMaster demo and free trial today.
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