Small Business Loans for Fitness Studios

Although national health and fitness club membership increased to 64.2 million people in 2019, this figure does not fully indicate the struggles fitness studios have recently experienced. Between 2015 and 2020, the health and fitness studio industry contracted by 0.5%, as people create their own opportunities to work out at home, outdoors or other places outside a fitness studio.

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This trend has only accelerated during the COVID-19 global pandemic. Local and state public health regulations have required most fitness studios to close or operate at reduced capacity. As such, people interested in working out have had to come up with new and creative ways to stay fit without gym access.

As fitness studios are allowed to reopen with health and safety adjustments, members and management alike have had to adjust to new rules such as capacity limits, mask use, and social distancing. Many gyms did not adjust their membership fees during closures or while offering limited services, either. Combined, these factors are leading to a reduction in membership: 59% plan not to renew once the pandemic ends.

If any of these modifications have affected your bottom line, small business loans for fitness studios can help you work toward sustainable revenue levels. Below, learn all about your low-cost funding options.

Financing Options for Established Fitness Studios During the COVID-19 Coronavirus Pandemic

In March 2020, the COVID-19 pandemic elicited changes from the federal government due to the accompanying economic crisis. It was then that the federal government passed the CARES Act, which included the new Paycheck Protection Program (PPP). This Small Business Administration (SBA) loan program supplies approved small businesses, such as fitness studios, with additional funding to help weather the ongoing financial emergency. PPP funds can also aid in the expansion of small business operations.

Although the first round of PPP loans closed on August 8, 2020, small business owners can apply for a second round of funding approved in December 2020 via the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (the “Act”). The Act established that small business owners can use funds obtained in the second PPP round toward additional costs not covered in the first round, which focused primarily on payroll costs.

For more information about applying for and using PPP loans, visit the SmartBiz Loans Paycheck Protection Program 2021 Guide. For further reading, check out these articles:

Applying for a first or second PPP loan in 2021

The SmartBiz streamlined PPP Loan application can help you fill out your application, upload required documents, and submit them to the bank quickly.**

SmartBiz can help you apply for these funds. We have specialized in SBA loans since 2013 and our network of banks has funded nearly $4 billion in SBA, PPP, and bank term loans.

Whether this is your first or second PPP loan, SmartBiz can help! Businesses with less than 500 employees that are negatively impacted by the pandemic can apply for their first PPP loan.

Start an application today here: PPP Loan Application

The program expires on May 31, 2021. No applications will be accepted after that date. Keep an eye on the SmartBiz Small Business Blog for updated information about an extension if approved by congress.

Funding challenges and opportunities for fitness studios

Both the fitness industry and other sectors aren’t immune to the economic challenges that business owners may face. For example, many small businesses are struggling to generate revenue and must turn to loans, but the more revenue lost, the harder it becomes to obtain funding from lenders, who often won’t approve those in undesirable situations. Furthermore, small business owners in all industries – fitness included – who are just starting out or have limited business ownership experience may discover that lenders will hesitate to approve them.

However, some lenders may believe that approving health and fitness studios for small business loans will be advantageous. That’s in part because, to make up for their closed doors, some fitness studios have begun to offer innovative, potentially revenue-raising virtual or outdoor fitness classes to their members. A recent survey found that 46% of its participants intend to incorporate virtual fitness classes into their daily routine, even after their studios open back up.

This survey also found that one-third of consumers also plan on physically going to the studio, with proper safety precautions, after first signing up for classes digitally. As such, fitness studios with plans to continue providing virtual workouts may attract more clients and earn more profit, thus incentivizing loan providers to approve them. To find out whether lenders will indeed approve your gym for loans, consider looking into the various types of funding below.

Funding options for fitness studios

Fitness studios have the ability to go to SBA or non-government sources for small business funding. Every small business loan for fitness studios will have distinct periods and rates, but the following guide should give you an overall idea of what to expect.

The SBA 7(a) loan program

The majority of specialists who work in small business funding recommend low-cost SBA 7(a) loans over any other type of small business loans for fitness studios. This is due to SBA 7(a) loans’ long terms,  low monthly payments, and low rates, all of which are beneficial for fitness studios. With SBA 7(a) loans, you can:

  • Obtain Working Capital Working capital is possibly the most consequential measure of your fitness studio’s well-being. To determine your working capital, simply deduct your current liabilities from your current assets or calculate the amount of cash your business has at its immediate disposal. You’ll know that you need to grow your assets if you have negative working capital. To do so, you can use your SBA 7(a) loan toward hiring additional employees or purchasing new studio equipment.
  • Consolidate Your Debts – You can help your small business refinance its current loans by using SBA 7(a) debt consolidation loans. These loans do not apply to just short-term business loans but also high-interest business loans, weekly or daily payment loans, and merchant cash advances.
  • Purchase Commercial Real Estate – If you’re interested in opening a second office space or fitness studio, you can take care of any owner-occupied commercial real estate purchases with your SBA 7(a) loan proceeds. Additionally, your SBA 7(a) loan can help you refinance any current commercial real estate mortgages.

Advantages of SBA 7(a) loans for fitness studios

Professionals in funding near-unanimously see SBA 7(a) loans as the “gold standard” for small business lending. SBA 7(a) loans are so greatly appraised due to their:

  • Wide use of funds
  • Lack of prepayment penalties
  • Availability in all 50 states
  • Affordable monthly payments
  • Low rates
  • 10-year terms (25 years for commercial real estate loans)

Requirements for fitness studio owners to apply for SBA 7(a) loans

You and your fitness studio must meet all the SBA 7(a) loan requirements listed below to apply:

  • Your fitness studio must be based in the U.S.
  • You must be at least 21 years of age
  • You must be a U.S. citizen or lawful permanent resident
  • Your personal credit score must be at least 650
  • Your fitness studio must be at least two years old
  • Your fitness studio must not have any recent settlements, tax liens, or outstanding charge-offs
  • You must not have any foreclosures or bankruptcies in the last three years
  • You and your studio must be on-schedule with all government-related loan repayments

There may also be some extra requirements that you must observe depending on the lender you choose for funding. For example, unlike many loan providers, SmartBiz Loans does not require potential borrowers to present their business plans.

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How to apply for an SBA 7(a) loan for fitness studios

Step 1: Verify that you and your fitness studio are eligible for SBA 7(a) loans as per the requirements listed above. For more information, visit the SmartBiz Loans guide to SBA Loan Requirements for Existing Businesses.

To discover how your business financials stack up for funding, use our easy-to-use online tool. SmartBiz Advisor™ helps you track the financial health of your business and learn how banks typically evaluate your business.* SmartBiz Advisor also recommends ways to help you improve your credit and strengthen the financial health of your business as needed. Read feedback from real SmartBiz Advisor users and sign up here.*

Step 2: Collect all required paperwork and consider seeking assistance from your accountant, bookkeeper, or another source of financial expertise. To learn more, visit the SmartBiz Loans Guide to SBA Loans.

Step 3:  Select a lender based on the below considerations:

Reviews

Read the customer reviews for your lender on Consumer Affairs,  TrustPilot, and Google. These reviews can help you to decide whether the lender will be a good match for your needs. Make sure that the reviews you’re reading are written by legitimate borrowers, and search to see if you can find other fitness studios in the crowd – their experience will likely be most pertinent to yours.

Availability

You should be able to easily reach all lenders regardless of whether their loan terms make perfect sense or leave you with several questions. If you are having trouble connecting with your assigned representative via phone or email, consider searching elsewhere for loans. The representative that your lender assigns to you should also be familiar with the health and fitness industry, your application, and your fitness studio.

Transparency

Look in your loan terms and agreement for exact interest rates and explicitly stated APRs. Your lender may be disinclined to fully detail your loan terms if these figures aren’t clearly stated. Finding these figures from the get-go could safeguard you against taking out a loan with hidden provisions ill-fitting to your needs.

Obvious loan terms

The fine print written in your loan should be clear, concise, and easy to understand. Don’t hesitate to ask questions about collateral requirements, payment amounts and frequency, prepayment penalties, and total loan amounts – these and other unfavorable loan costs can be hidden in complex fine print. Should your loan provider respond with uninformative or vague answers, consider choosing a different lender.

Fees

There will most likely be repayment and interest fees in your loan, but the presence of several additional fees can be cause for concern. That’s why you should consider switching lenders if you spot several extra fees. It is also important for you to confirm that all your loan fees are due prior to your loan’s funding and during your loan’s lifetime.

The SBA 504 loan program

Small businesses can acquire low-cost modernization or expansion funding with the SBA 504 loan program. Proceeds from SBA 504 can be used to open new locations for your fitness studios, hire new employees, and upgrade equipment.

If your fitness studio meets the public policy goals of your local community development corporation (CDC), SBA 504 loans can be particularly beneficial. In this situation, your SBA 504 loan and CDC may together cover as much as 90% of your expansion and modernization costs (at most 50% from your SBA 504 loan and at most 40% from your CDC). The out-of-pocket costs for the remainder of the project would be your only immediate responsibility.

The SBA microloan program

If your company qualifies as a very small business (a.k.a. microbusiness) according to the SBA, your fitness studio can apply for the SBA Microloan Program. Microloans, which are at most $50,000, can go toward all business costs other than debt payments and commercial real estate purchases.

Non-SBA loans and other funding options

Although SBA 7(a) loans are often your wisest small business funding choices, other options are available as well. These options often come with shorter terms, higher rates, and larger payments. Examples of these options include:

Bank term loans

If your fitness studio doesn’t qualify for SBA loans, bank term loans can be a suitable option, as they can provide funding as quickly as can SBA loans. Debt refinancing or working capital purchases are permitted by both loan types, though these loans’ rates, repayment terms, prepayment penalties, and amounts differ. For more information regarding these provisions, speak to your loan provider about your specific concerns.

Business lines of credit

Business lines of credit are loans of maximum amounts proportional to your credit score, though usually less than bank term loan amounts. Another key difference between bank term loans and business lines of credit: You are mandated to use all your funds with the former. Additionally, only the former requires interest payments on your entire loan – if you don’t use your entire business credit line, you’ll only pay interest on the portion you do use.

Until your funds run out, you can access your business line of credit as frequently or infrequently as you desire. You may also prefer business lines of credit for your fitness studio because they rarely have the collateral requirements of other loans. Visit the SmartBiz Loans blog Small Business Lines of Credit Pros and Cons to learn more about business lines of credit.

While business credit cards and business lines of credit largely resemble one another, they are not identical. For example, if you max out and repay your loans on a business credit card, you still have the ability to resume using it, whereas business lines of credit entirely expire upon being maxed out. Additionally, business lines of credit do not come with the spending rewards sometimes found among business credit cards. Read the SmartBiz Loans blog Finding the Right Credit Card for Your Small Business to find out more.

Merchant cash advances

You will likely have the option to apply for merchant cash advance (MCA) funding if your fitness studio accepts debit or credit card payment. MCA’s allow you to obtain a loan from a card provider, whom you repay by sending increments of money set aside from each and every card transaction. If you would rather go with traditional installment-based payment plans, that can be arranged as well.

Even though many are fond of MCAs due to their convenience, this ease can mask the challenges related to MCAs’ extremely high APRs. For additional information, read the SmartBiz Loans blog What You Need to Know About an MCA.

Fitness Studio Funding Success Story

Andrew Todd is the owner of TriFytt Sports, a California youth sports company started in 2003. Andrew came to SmartBiz Loans when he needed a commercial real estate loan to fund his purchase of a 24,000 square-foot full-service sports complex.

Andrew first took out a $90,000 loan to purchase an 11,000 square-foot space. Later, he found TriFytt’s current 24,000 square-foot space and worked with SmartBiz loans to obtain additional funding. Now, he has a $215,000 loan at 6% with a 10-year term and $2,200 monthly payments. “Roughly 20,000 square feet is open and will be used for basketball courts, a weight room and a physical therapy clinic,” Andrew says, “We’re excited and ready to open on schedule.”

Why Choose SmartBiz Loans?

Need funding to rebuild your business? Don’t waste time going from bank-to-bank filling out multiple applications. SmartBiz helps you find the best financing for your unique needs whether that’s an SBA loan, Bank Term loan, or other financing.  About 90% of qualified applications we refer to banks are funded and our financial professionals are on hand to answer your questions. Discover if you’re pre-qualified here without impacting your credit scores** and read the SmartBiz 5-star customer service reviews on TrustPilot.

 *The information provided through SmartBiz Advisor, including the Loan Ready Score, is for educational purposes only. SmartBiz Advisor is not a financial or legal advisor as defined under federal or state law. Use of this information is not a replacement for personal, professional advice or assistance regarding your finances or credit history.

**We conduct a soft credit pull that will not affect your credit score. However, in processing your loan application, the lenders with whom we work will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and happens after your application is in the funding process and matched with a lender who is likely to fund your loan.

 What you need to know: The information provided through SmartBiz® University and the articles contained therein are for educational purposes only. Use of this information is not a replacement for personal, professional advice or assistance regarding your finances or credit history.