Answers to gym business loan FAQs.
- Gym business loans can be easier to obtain than you might think.
- Whether banks are the best option for obtaining a gym business loan depends on your gym business’s circumstances.
- Interest rates are only the start of the considerations for a gym business loan.
- This information is for gym business owners looking into gym business loans from conventional lenders and alternative lenders.
Obtaining a loan for your gym business is a great way to cover important costs or grow your business when the time is right. You might have heard some grumblings about small business loans: They’re hard to obtain; your credit has to be flawless; don’t ask for too much money or you’ll be denied. Fortunately, these prevalent ideas surrounding gym business lending aren’t necessarily true.
It’s important to manage debt properly, but doing so can help grow your gym business at a faster rate than scrimping and saving. To help you obtain a small business loan for your gym, we answer the gym business loan FAQs.
1. Is getting a gym business loan the hardest thing you’ll ever have to do?
No. Like other forms of financing, obtaining a gym business loan is all about preparation. Ensuring your books are transparent and you maintain the reserve liquidity to encourage the lender that you’ll be able to service your debt consistently on time will lead to success. And experts agree the best way to avoid unnecessary snags is to prepare for the application process.
A lot of the frustration around obtaining gym business financing can be eased by doing your due diligence. Be prepared, and have all your documents ready to present to lenders. Click here to apply
- Do you need perfect credit to get a gym business loan?
No. A low credit score is a concern for some lenders, but banks aren’t the only lenders out there. In fact, it’s far from impossible to get a gym business loan with bad credit. Alternative and private lenders are often able to offer more flexible terms, including which level of creditworthiness they can approve.
While traditional banks may be restrictive when it comes to obtaining credit, there are alternative options.
Alternative lending sites attend to base lending decisions on the financial realities of a gym business rather than the financial history of business owners. Specifically, alternative lenders take a close look at business performance, industry type, time in business and cash flow before handing out a loan.
3. Is the best way to obtain a loan for your gym business through a bank?
Not always. Entrepreneurs have more than one option for obtaining financing; banks are not the only game in town. There are alternative and private lenders, as well as creative types of lending like invoice factoring, which can help gym business owners shore up their capital without going through the lengthy and restrictive application process required by conventional lenders.
For gym business owners looking to borrow a relatively small sum (between $5,000 and $250,000), getting a bank loan is likely to be more trouble than it’s worth. Banks are more suitable for businesses that are interested in borrowing a large amount of cash and repaying the loan over a long period of time at a relatively low interest rate. Make sure you fall under those categories before applying through a bank.
Alternative lending sources often provide faster approvals for shorter loan repayment periods; sometimes gym businesses can obtain access to the funds in as little as seven days. Because the terms are more flexible, interest rates are often higher.
4. Is the worst way to obtain a loan for your gym business through a bank?
There is no “worst” type of financing; it depends on your gym business’s circumstances and your ability to reliably service any debt you take on. Just because you can obtain financing elsewhere doesn’t mean conventional lenders and bank loans are not for you.
Sometimes, a bank offers exactly the funding option you need. In fact, for established businesses looking to grow at a moderate rate, traditional bank funding is generally a great option. It’s when a gym business doesn’t fit those criteria that gym business owners should consider shopping around.
If you are a new gym, pre-revenue or low revenue, but plan to grow very quickly due to presales and grand opening– then a traditional bank loan may actually limit your growth.
To decide whether a bank loan is right for your business, research both traditional loans and alternative funding sources. It’s also important to know your business inside and out.
“If you anticipate steady growth over the next few years, then a traditional bank may be best,” Adam said. “If you are growing like crazy and you know you will need to keep increasing your loan size by large increments each quarter, then entertain a nonbank lending partner, as banks may not be able to keep up with your needs.”
5. Is it true that the more money you ask for, the less likely you are to be approved for a gym business loan?
No, the requested principal amount of the loan should not have an adverse impact on whether or not you get approved. Lending institutions are generally prepared to fulfill large financing requests for the right borrower; it’s more lucrative for them in the long run anyway. Don’t be afraid to ask for the amount of money that you really need! Click here to apply
A gym business should apply for the amount it needs – no more and no less. Consider both how much money you really need to grow your gym business and how much money you can afford to pay back every month.
“Make sure that you have cash flow to make your loan payments. That’s the biggest thing that a lender is going to check – that the gym business owner can actually afford to make their loan payments.
6. Is the interest rate the most important factor to consider?
It’s easy to put too much emphasis on the interest rate of the loan. Essentially, the interest rate determines just how much the loan is going to cost by the end of the repayment period. It’s certainly a crucial piece of information, but it’s just one aspect of the entire deal.
Although the interest rate is an important aspect to consider when choosing a lender, there are many other factors to keep in mind. Harris suggested asking what the terms of the loan are, how soon you need to repay the money and what you can use the loan for.
7. What is the first step when seeking a gym business loan?
The first step when trying to get a business loan is gathering everything you need to apply. These needs include tangible items and process considerations, such as the following:
- Knowledge on how well bank term loans, SBA loans and alternative lenders do or don’t fit your needs
- Proof of your credit history, small business age and yearly revenue (many lenders set minimum thresholds for these values)
- A sense of how much you can afford per month in loan repayments and attendant fees
- An idea of which items you might put up as collateral, if necessary
- A list of potential lenders
- Documents such as tax returns, bank statements, financial statements, legal documents and a business plan.
- What is the best way to fund a gym business?
Although there’s no objective answer to this question, you could argue that small business loans are a top option. After all, they’re so frequently used for a reason: If you appropriately plan for them, you can budget for monthly payments fairly easily. On the other hand, you might prefer angel investors or venture capitalists, since they might not ask you to repay them if your business fails. But you do give up quite a bit of business control and equity to work with these investors.
You can also turn to loans from friends and family, credit cards, crowdfunding, or business lines of credit. Each of these options has its pros and cons. For example, think about what could happen in your personal life if you fail to repay a loved one. Credit options have problems, too: They may come with high fees that make them untenable. Crowdfunding also doesn’t guarantee that you’ll reach your desired funding level.
9. How long does it take to repay a gym business loan?
The answer to this depends almost entirely on your loan term. A loan with a five-year term should take that long to repay. That said, if you can pay your loan off early, that’s a good thing, as long as you don’t incur a prepayment fee for doing so. If there is a fee, you might want to hold on to that loan a bit longer. Your monthly expenses might be less than the potential fee. Click here to apply
An Outsourced CEO and expert witness, Jim Thomas is the founder and president of Fitness Management USA Inc., a management consulting, turnaround and brokerage firm specializing in the gym and sports industry. With more than 25 years of experience owning, operating and managing clubs of all sizes, Thomas lectures and delivers seminars, webinars and workshops across the globe on the practical skills required to successfully overcome obscurity, improve sales, build teamwork and market fitness programs and products. Visit his Web site at: www.fmconsulting.net or www.youtube.com/gymconsultant.