From the perspective of an investor or businessperson, the sole purpose of opening a gym is to make a profit.
Additionally of course, a gym provides numerous people a chance to transform their lives and get in good physical shape. Further reinforcing the definition of a business’ job of adding value to the community they serve.
But how big of a loan do you need in order to start a gym?
The loan amount depends upon many factors, such as the gym’s location, size, equipment and the revenue forecast. The loan amount can vary from $10,000 to $1,000,000 depending upon the type of gym you are opening.
In this article we will review some factors that determine the size of loan and look at some tools that can help you make a better decision.
Let’s get started!
Loan financing options for you to start a gym
After you have decided to open a gym, securing its funding is next. There are multiple options for financing your gym, each of which has its pros and cons. The following options can be used to finance your gym:
- Personal savings
- Bring in an investor(s)
- Have a partner
- Bank loan
In this article, we will discuss the “Bank loan” option, the amount needed, the cost breakdown, the pros and cons, and whether you should take the loan or not?
How much loan do you need to start a gym?
The loan amount depends upon many factors, such as the gym’s location, size, and equipment. The amount can vary from $10,000 to $1,000,000 depending upon the type of gym you are opening.
1. Home gym – starting at $10,000
2. Mid-size gyms – starting at $200,000 to $400,000
3. Mega size gyms with every facility you want – $1,000,000 and above
The amount is huge because you need to rent and buy everything from scratch and establish your business which requires a lot of staffing, marketing, and discounts.
For a more detailed view of how to start your gym business, you are invited to review this article:
How Do I Start My Own Gym Business?
Breakdown of the loan amount to start your gym:
Here are some of the most common costs associated with starting your gym.
Licenses, Certifications, and Permits:
When starting a gym, there are multiple costs related to business licenses, certifications, and permits. If you don’t have a personal trainer’s certification and your budget is limited for staffing, you should apply for one so you can work with clients. The cost of a quality personal trainer certification varies from $500 to $100 for beginner-level fitness training certification.
Secondly, you have to ensure that your employees are also certified and if you don’t find the right ones, you have to apply for their certification, which may cost about $800 per qualification.
Lastly, you will need to apply for a business license, which may cost about $50-$200 plus a renewal fee. Go to your city, county and state websites to find exact figures and current information on proper licensing.
Property cost:
Two of the most significant factors that will influence your starting cost will be the size and location of your gym. A commercial gym takes around 3,000 to 4,000 square feet. The average cost of renting a 2,000-square-foot fitness studio is $6,000/ month. The total cost of renting 4,000 square feet is around $10,000-$12,000.
Gym equipment:
When you are opening a new gym, you need to ensure that you have top-notch equipment so that customers are attracted to your gym. The average cost of buying equipment for a commercial gym is around $50,000 to $60,000. But first, you must conduct market research to get good quality equipment at a low cost.
For some excellent option on gym equipment, we really like Power Systems and have been buying from them for years:
An additional excellent resource for equipment is Flybird Fitness, where you can find some very good deals (they seem to have lots of specials with expiring deadlines):
Management software and point-of-sale system:
In this digital world, every business needs management and accounting software to ensure that operations are running smoothly and manage the business finances. The cost of the software, point-of-sale system and any hardware it might need will be $3,000.
Legal fee and insurance cost:
There are several legal, commercial, and insurance fees that you have to pay before even opening a gym. So, it is advisable to hire a lawyer and let him do all your tasks related to this field. The cost of legal fees, including everything, is around $15,000, and the cost of insurance is $7000.
Marketing and Advertising:
When you establish a new gym, you must advertise your gym through various media. You can do the marketing yourself (it’s highly suggested that you always are in control of your Marketing Mix) or hire an agency to do this in exchange for a monthly fee, which might range from $500 to $5000 per month and usually includes a variety of media including print, digital, local, and more.
Employee wages:
You’ll have several employees who will be helping you with the gym in exchange for salaries. When you start a business, it is advisable to have employees’ wages for at least 3 months in your bank because the business is just ramping up. For this purpose, you may need $50,000 to $60,000 depending upon the size of location and scope of services provided.
In addition, many other factors contribute to the total cost, such as water, electricity, maintenance, phone, internet services, utilities, and credit card processing fees. However, we will not discuss those in this article.
For a more thorough breakdown of what it costs to start a gym please review this article:
How Much Does it Cost to Open a Small Gym? (Free templates)
Pros and Cons of taking a loan to start your gym:
Pros:
- Provides a cash flow boost
- Maintain business ownership
- Access to large sums of money
Cons:
- Extensive Paperwork and Loan Application Process
- Lack of Flexibility
- Risk of Default
- Additional expense (interest expense)
The bottom line: Should you take out a loan to start a gym?
If you don’t have personal savings or do not have an investor, the question arises: should you take the loan to open a gym?
If it’s the right opportunity for you and you have done your due diligence, the answer could be a big YES because an average commercial-size gym makes about $150,000 profit annually, which turns out to be $12,500 in free cash flow monthly.
If you take out a loan of $200,000 today, considering the lending rate of banks is 4.75% in July 2022. At this loan amount at this rate, the monthly payment will be $3,750 for a five-year term. Once paid off you’ll be debt free and have 100% equity in the gym, unlike when you have a partner or an investor with you.
In addition to starting your own gym, it is also suggested that you review the options of investing into a gym franchise, which can provide you with a proven roadmap.