Everything to know about gym equipment financing

Opening a gym can be an exciting adventure as a business owner. Once you’ve found the perfect location, it’s time to stock your gym with the right equipment. But not only do you need to decide what equipment is going to appeal to your customers and represent your gym brand, you need to figure out how you’re going to pay for it with the right gym equipment financing. 

Gym equipment loans and financing for 2020

Opening a gym can cost tens or hundreds of thousands of dollars. But since the equipment itself can serve as collateral, qualifying for gym equipment financing may be easier than you think. There are dozens of funding options to choose from and, with good credit, you may be able to secure a low interest rate and attractive terms. 

8 options for gym equipment financing

From treadmills to exercise bikes to elliptical machines and free weights — there are many ways to fill your gym with the equipment it needs. Here are a few financing and leasing options to consider, based on your situation. 

BlueVine

BlueVine offers numerous business financing options, including term loans which might work well for your equipment financing needs. 

Rates: 4.8% and up

Requirements: 

• 600 FICO Score
• At least 6 months in business
• $10,000 in monthly revenue

Loan Amounts: Borrow up to $250,000

Repayment Terms: 6-12 months

Pros:

• Borrowers with fair personal credit may qualify (though not at the best rates)
• Receive funds in as little as a few hours once approved
• Apply with a soft personal credit inquiry that won’t hurt your credit score

Cons: 

• Start ups aren’t eligible
• Maximum loan amount is low compared with some other lenders
• Short repayment terms with weekly payments automatically drafted from your business bank account

Kapitus

Founded in 2006, Kapitus offers a number of business financing options, including equipment financing. Qualifying businesses may borrow between $10,000 to $500,000. 

Rates: 7.00% – 30%

Requirements: 

• 600 FICO Score (675 for financing over $150,000)
• At least 2 years in business (for loans over $150,000)
• No bankruptcies in the last three years

Loan Amounts: $10,000 to $5,000,000

Repayment Terms: 2 – 7 years

Pros:

• Borrowers with a fair credit rating may qualify (albeit at a higher rate)
• Start ups may qualify for up to $45,000 in funding with a FICO Score of 600 or higher

Cons: 

• Weekly or bi-weekly payments may be required
• Lender charges an origination fee of 3.5% to 5%

CIT

CIT is one of the top 50 banks in the United States. Among other services, CIT offers equipment financing resources for fitness centers and other businesses.

Rates: 5.49% and up

Requirements: Minimum credit score not disclosed, but reported to be 700 

Loan Amounts: $1,000 to $500,000

Repayment Terms: 6 – 72 months

Pros 

• Potentially receive funds in as little as one day 
• Gym equipment leasing and financing options available
• Payment flexibility with monthly, seasonal, and deferred payment options

Cons: 

• Good personal credit needed to qualify
• Loan applications over $500,000 require detailed financial documents

Trust Capital

Trust Capital specializes in equipment financing, equipment leasing, and working capital. The lender has provided fitness equipment financing to qualified businesses for over 15 years. 

Rates: Not disclosed

Requirements: 

• 600 credit score for start up financing
• No bankruptcies in the last seven years
• No outstanding tax liens
• Business license (or active business entity) filed with secretary of state

Loan Amounts: Up to $5,000,000 (with full financial disclosure for established businesses) 

Repayment Terms: 12 – 72 months

Pros:

• Potentially qualify for up to $350,000 in funding with a one-page application
• Deferred payment and seasonal payment options available

Cons: 

• All gym owners must provide a personal guarantee
• Rates and fees not disclosed on website

National Funding

National Funding, established in 1999, offers equipment leasing and financing options. Over the last two decades, the lender has provided funding to more than 50,000 businesses. 

Rates: Not disclosed

Requirements: 

• 576 Minimum FICO Score
• 6 months in business
• Provide a quote from an equipment vendor

Loan Amounts: Up to $150,000

Repayment Terms: Not disclosed

Pros:

• Borrowers with bad credit may still qualify, albeit with higher interest rates
• No down payment required

Cons: 

• Must apply to learn more since rates and repayment terms not disclosed online
• Low maximum loan amount compared with other lenders

SBA 7(a) and 504 loans

Small Business Administration loans represent some of the most affordable ways for companies to secure financing. Yet due to the strict requirements of SBA loans, they aren’t the perfect fit for every business. SBA 7(a) and SBA 504 loans may be used to finance equipment purchases. 

Rates: Varies among lenders; Tied to the prime rate or similar benchmark

Requirements: 

• Minimum FICO SBSS Score of 140
• Company must be a qualifying small business
• Cannot be an ineligible business

Loan Amounts: Up to $5,000,000

Repayment Terms: Varies based on loan type and size, but may extend from 10 to 25 years

Pros:

• Competitive interest rates for well-qualified borrowers 
• Longer available repayment terms

Cons: 

• Good credit (both personal and business) may be required
• Personal guarantees are commonly required

Like SBA loans, traditional bank loans have similar benefits and drawbacks when it comes to equipment financing. 

Business lines of credit

In some ways, business lines of credit are similar to business credit cards. They offer your company the flexibility to borrow money, repay all or a portion of those funds, and then borrow again on the same account (over a certain period of time). Business lines of credit can help with cash flow challenges and the financing of important purchases, like the equipment your business needs to operate. 

Rates: Competitive interest rates available for long-established businesses with good business credit scores and history — especially for secured lines of credit

Requirements: Lenders may examine your business credit and personal credit, time in business, annual revenue, and cash flow

Loan Amounts: Lenders will consider your business cash flow, debt-to-income ratio, and other factors when setting your credit limit

Repayment Terms: Varies between lenders, but renewable terms often available

Pros:

• Borrowing flexibility
• Low rates available to well-qualified borrowers
• You may qualify to borrow large amounts, depending upon the lender and the strength of your application

Cons: 

• You may pay higher rates and fees if your credit rating isn’t up to par
• Lenders often require personal guarantees
• Newer businesses may not qualify

Invoice financing

Invoice financing allows you to borrow funds against the money your customers currently owe your business. Essentially, your unpaid customer invoices serve as collateral. Invoice financing often features easier-to-satisfy qualification requirements, but it can be an expensive way to borrow. 

Rates: Typically 15% – 35%

Requirements: Lenders may consider the quality of the invoices and your credit history

Loan Amounts: Varies based on quality and size of outstanding invoices

Pros:

• Qualification criteria typically less strict than other financing options
• Pricing often transparent and easy to understand 

Cons: 

• Interest rates and fees tend to be high
• Short repayment terms may not be the ideal financing choice for large ticket purchases

Other short-term financing options, like cash flow loans and merchant cash advances, have similar benefits and drawbacks when it comes to equipment financing. 

How to qualify for gym equipment financing

Lenders and credit card issuers may approve or deny your application based on different factors. However, you can work to stack the deck in your favor when it comes to approval odds. Open a free account with Nav and you’ll receive personalized loan matches based on your business and personal credit data. 

In the meantime, here are some tips that might make it more likely for your gym equipment finance application to be approved. 

• Make sure your business is legitimate. This includes having a current business license (if required) with your secretary of state. 
• All gym owners should be prepared to sign a personal guarantee. If any owner is unwilling to provide a personal guarantee, you may have a difficult time finding affordable financing options. 
• Your personal FICO Score will likely need to be a minimum of 600. However, the higher your credit score, the better your odds of qualifying. Higher credit scores could also help you secure lower rates and better financing terms. 
• Your credit report should be free of bankruptcy. If you’ve filed for bankruptcy in the past seven years, you may not qualify. 
• Resolve any outstanding tax liens before you apply for gym equipment financing. Otherwise your application may be declined. 

Is it possible to qualify for gym equipment financing with bad credit? 

Credit problems and low credit scores can make it difficult to qualify for any type of financing — both on a personal level and for your business. Yet there are some business financing options available to borrowers with poor credit ratings. 

When you apply for equipment financing with bad credit, you should be prepared to pay higher rates and fees if you qualify. The loan amounts lenders are willing to extend you will likely be smaller as well, and you may have to accept shorter payback terms.  

Your best bet is to work to improve your credit before you apply for gym equipment financing. But if you need funding now, the following lenders might work with you even if you have less-than-perfect credit. 

• BlueVine
• Credibly
• Kiva
• Fundbox
• OnDeck

How many years can you finance gym equipment? 

Repayment terms come in many shapes and sizes where gym equipment financing is concerned. Companies can find funding options that stretch between a few months to as long as 25 years.

These factors may influence how many years you can finance gym equipment. 

• Your personal credit history and score
• Your business credit history and score
• How much you need to borrow
• Your business financials
• How long you’ve been in business
• The lender’s risk tolerance

Should you buy or lease gym equipment?

You’ll be faced with an important decision when it’s time to stock your gym with the best equipment for your customers. Is it better to lease or buy? 

There’s no right or wrong answer here. Yet there is a best choice for your situation. Below is a breakdown of buying versus renting commercial gym equipment, along with some benefits and drawbacks of each choice. 

Pros of buying commercial gym equipment

• Your company gains an asset. If you want to upgrade to newer gym equipment in the future, you can sell the old equipment to recuperate some of the money you spent.  
• The gym equipment itself may serve as collateral for the loan. So, equipment loans may be easier to qualify for compared with other types of business financing. 
• Your equipment loan might help you build business credit. But it’s essential to always pay your bill on time or early. 

Cons of buying commercial gym equipment

• The upfront cost is often higher. If a lender doesn’t offer you 100% financing, you may need to come up with a down payment.  
• You may need high credit scores to qualify for a low interest rate. But you may be able to qualify for some financing even with credit challenges. 
• Late payments could damage your business credit rating. If the account shows up on your commercial credit reports even the occasional late payment could lead to serious credit problems. 

Pros of renting commercial gym equipment

• Your lease may include maintenance and repair costs. This may help you avoid or reduce unexpected business expenses. 
• The upfront cost of leasing equipment is often lower. You don’t usually need a downpayment for a lease. 
• You’re protected if your equipment becomes outdated. When your lease ends, you have the option to upgrade to newer equipment. 
• Your lease payments may be tax deductible. Check with your accountant to verify.

Cons of renting commercial gym equipment

• You don’t own the equipment at the end of the lease. However, you’ll usually have the option to purchase it.
• Your tax benefits may be limited. The leasing company owns the equipment, so it gets to take advantage of owner tax benefits like depreciation. 
• Some leasing companies charge prepayment penalties. Such penalties could make it costly if you want to pay off your lease early. 

How much money do you need to open a gym? 

Online reports peg the cost of starting a new gym between around $10,000 to $300,000. With such a wide cost range, you’ll need to conduct a lot of research to estimate the cost of your specific project. 

When you’re trying to figure out the cost of starting a gym, here are some important factors to consider in your calculations. 

• Where will your gym be located and what are the costs associated with the building?
• Do you need to remodel the building to make it work? 
• How much will utilities and insurance cost per month?  
• Will you open a franchise or try to build your own brand? 
• How many employees do you need to operate and how much will payroll cost? 
• What amount do you plan to spend on marketing? 
• Do you need to hire an accountant or attorney? 

Do you need a license to open a gym? 

Most businesses require some type of licensing to operate in their state. Gyms are no exception. Yet your gym may require specialty licensing and permits as well, depending upon the state and city where your business is located. 

In addition to licensing requirements, it’s wise to secure good liability insurance coverage. Injuries are common at fitness centers and liability insurance may help protect your business if you are sued by a customer. Most gyms also require their members to sign liability waivers to protect themselves.  

Before you open a new gym, it’s highly advisable to consult with an attorney. A legal expert can help protect you as you navigate licensing requirements, liability waivers, and more. 

Nav’s final word: Gym equipment financing

When you’re looking for the best gym equipment financing options for your business, it pays to compare options from multiple lenders. Nav’s free business loan calculators can help you compare the true cost of financing to make sure you’re getting the best deal available. 

If your personal or business credit needs work, you may still qualify for equipment financing or an equipment lease. Since your equipment itself serves as collateral for the loan, it helps reduce the lender’s risk. 

With fair or poor credit, you might have to settle for less than the best when it comes to your current financing options. However, you can and should make it a goal to improve your credit rating. Once you earn good credit, you may be able to refinance or enjoy better funding options in the future.