Gym funding: recurring dues, expensive equipment and the summer dip

Gyms and fitness studios have one of the steadier income streams in small business: recurring monthly dues. Against that sit big, lumpy costs: equipment, buildouts, and the occasional repair to an HVAC system that a room full of people can't do without. The right funding puts the long-lived kit on long money and leaves the recurring dues free to run the place.

The cash-flow shape of a gym

• Recurring dues. Members pay monthly by card or bank draft. Funders can see this income clearly, and it's predictable unless cancellations climb.
• Sign-up seasons. Many gyms see a rush of new members around the new year and a quieter stretch in summer, though location and format change the pattern. Your own join and cancel data is the guide.
• Class and personal-training revenue. Boutique studios rely more on class packs and drop-ins, which are less predictable than dues.
• Equipment cycles. Cardio machines, racks and connected equipment wear out and date quickly. Members notice.
• Buildouts. New locations, locker rooms, recovery areas and studio rooms are large, planned costs.
• Presales. New locations often sell memberships before opening, which brings cash in early and creates an obligation to open on time.

Which funding fits, and which doesn't

SBA 7(a) loans can cover equipment, working capital and real estate improvements through a participating lender. On equipment, the IRS lets businesses elect a section 179 deduction instead of depreciation for certain property. Ask your accountant how that applies before it drives a purchase.

A merchant cash advance (a lump sum repaid from a share of card takings) fits how gyms are paid, but it's expensive. Keep it for genuine short gaps, not for equipment that will be on the floor for years.

What it costs: a worked example

Say you take $50,000 for new cardio machines at a 1.20 factor rate (the fixed multiple you repay) over 6 months, paid daily.

• You repay $60,000.
• That's 126 business-day payments of about $476.19.
• The cost is $10,000, which is about 75% APR.

As equipment financing at 18% APR over 24 months, the same $50,000 costs about $2,496 a month and roughly $9,909 in total interest: a similar dollar cost spread over four times as long, at a quarter of the rate. That's half of our standard $100,000 example at $4,992.41 a month. Check your own offer in the calculator on this page.

Sterling's take: a treadmill earns for years. Pay for it over years.

What funders typically ask a gym for

• Business bank statements for recent months.
• Card processor and billing-platform reports showing monthly dues.
• Active member count and cancellation trend, if you track them.
• Your lease.
• For equipment: the supplier quote.
• A schedule of existing loans, leases and advances.

Our funding partner's programs suit gyms trading 12 months or more with about $80K a month in deposits, an owner credit score of 600+ and no more than two advances or loans running. Smaller studios can still ask.

Red flags specific to gyms

1. Advances repaid from recurring billing you rely on. If the funder takes its share before dues reach your account, your fixed costs come out of what's left. Model the slowest month.
2. Equipment leases that end with a large buyout. Low monthly payments can hide a big end-of-term cost. Ask for total cost to own.
3. Over-collection. The FTC has acted against cash advance providers that debited more than they disclosed and used confessions of judgment against owners. Reconcile statements monthly.

Before you sign

Check your dues revenue in your weakest month. If the repayment still fits there, the deal can work.