Securing Loans for Fitness Centres: What You Need to Know

Securing financing to open your gym is a monumental task. As is the case with setting up a new business, there are numerous aspects to consider and hurdles to overcome. The market is saturated with gyms, so creating a brand identity that stands out from the crowd is critical. Find the appropriate location, decide upon your target audience, and contend with numerous upfront and start-up costs.

We will delve into understanding how gyms and fitness centres work and how you can gain access to the funding you need. Before we get into the details, let’s go over the basics.

The Estimated Cost of Setting Up a Gym

Setting up a fitness centre or gym would require substantial upfront capital and additional funds for fixed and variable costs. This can include equipment costs, staff salaries, skilled trainers, rent, utility costs, marketing, and other factors.

In the UK, the estimated cost of opening a gym can range from £75000- £120000. While this is just an estimate, setting up full-fledged fitness centres can cross £1,000,000 as well. We have listed some major costs to consider:

Equipment Finance

One crucial factor is the purchase of your training equipment. To provide members with the best training experience and help them reach their fitness objectives, a boutique fitness centre could opt for a mix of equipment like treadmills, dumbbells and specialised machines like bench presses, pulleys, etc. You could either lease out the equipment or buy it upfront. Naturally, the leasing option puts less strain on your liquidity, but it involves a recurring fee. Every option has advantages and drawbacks; hence, choosing the best course of action for your company and yourself is crucial.

Monthly Bills and Payments

Recurring monthly payments are another expense to factor in. Although it’s difficult to pinpoint, most companies lose money in the first year. This is something to consider since your minimum monthly payments will require cash flow. Other constant payments to consider are utilities, including water, energy, electricity, and phones; employee compensation; gym equipment lease; mortgage or lease payments; insurance; marketing; and payment processing costs.

Location, Gym Interiors, and Upkeep

The impression of your gym will affect your business and profitability. Your high-end gym with the newest workout gear needs to look the part. Changing the gym décor and adding your personal touch requires time and money even if you have discovered the ideal gym location. Maintenance will be a continuous expense, as well as monthly rentals.

Cash Flow Requirements and Liquidity

Depending on the type of funding you have chosen will affect your liquidity and cash flow. This is especially true for small business loan applications and gym chains where criteria exist. Having working capital ready for your company can help you tide over and pay for any recurring bills.

Sales and Marketing

Sales and marketing are essential to draw in new members, expand your membership base, and help your company flourish. Your gym budget will have to consider this continuous expense. Activities in sales and marketing cover all you do to create new customers, such as gym membership, in this case. This might cover your social media initiatives, paid advertising budget, website, landing pages, and more. You decide how much you commit to your sales and marketing. If you are trying to keep to a strict budget, there are strategies for natural business growth. Still, your company will gain greatly from a sales and marketing budget in general.

Types of Funding For A New Fitness Centre

Bank Loans and Commercial Mortgages

A bank loan or commercial mortgage is among the most conventional sources for a gym’s financing. Under secured loans, the gym owner usually pays back the loan using the property as collateral. Conventional mortgages usually attract cheaper interest rates than unsecured loans. Acquiring the loan can be difficult, though, particularly for start-up companies with little credit history. Commercial mortgages are perfect for small businesses that are buying or renovating gym facilities since you can spread the expense of property over several years as per the loan term.

Government Grants and Programmes

Gyms and fitness centres are among the small businesses the UK government supports with several subsidies and funding initiatives. Such businesses usually prioritise environmental sustainability, job generation, or innovation stimulation. The Start-Up Loans Scheme and New Enterprise Allowance (NEA) of the UK Government provide financial assistance for start-ups. Specific regional government projects, such as those managed by devolved governments or local councils, also provide funds to assist new company projects in the leisure and fitness sectors.

Angel Investors

Angel investors are high-net-worth individuals who commit their personal money to companies in return for equity or a percentage of earnings. Gyms looking for both funding and knowledge sometimes choose angel investors. Apart from financial support, they sometimes give business owners insightful mentoring and direction to surpass the obstacles of the fitness sector. This typically involves giving up a percentage of the company, and the investor may also take an active role in running the gym.

Crowdfunding

When several individuals contribute funds towards a business or start-up, it is known as crowdfunding. Gym owners may show their business ideas to the public on sites like Kickstarter, GoFundMe, and Crowdcube in return for financial support. For gyms with a distinctive idea or strong community presence, crowdfunding can prove to be a boon. Donors or investors provide small amounts of money in exchange for membership discounts or gym equity. This type of financing lets entrepreneurs raise money and monitor public interest in their concept.

Equipment Leasing and Asset Financing

Many gyms require expensive equipment, so buying outright might be a major financial burden. Two choices to consider are asset financing and equipment leasing. While asset finance lets the gym owner borrow money against the value of the equipment, which may be repaid over time, leasing lets a gym use equipment without a significant upfront investment. Purchasing technology, fitness equipment, and other assets necessary for gym operations calls for this kind of financing.

Individual Savings and Friends/Family

Many gym entrepreneurs support their companies with personal savings or loans from friends and relatives. Though it might be dangerous, this method might not require third-party approval or loan dealing. Unlike official lenders, family and friends cannot provide the same financial knowledge or loan flexibility.

Conclusion

Setting up a gym can be a profitable endeavour. However, it is vital to have a concrete financial plan in place. Fitness centres have several funding options available, but sometimes, a nuanced and customised approach is required. Small businesses, SMEs, gyms and fitness centres can connect with leading fintechs like Nucleus for bespoke funding solutions. Nucleus has invested substantially in AI and automated the entire funding journey. Gyms and fitness centres can obtain the funds they need in record time with lightning-fast decisions. Learn more about Nucleus and get the funding you need to turn your fitness centre into a leading brand.