How to Get The Lowest Loan Payment For Your Gym

Let’s face it: loans are the biggest burden a business owner can face.

They’re suffocating, because essentially, they are the cost of buying back your business.

In today’s blog, we’re going to talk about business loans and how you can get the lowest loan payment for gyms. Get the best possible rates when it comes to your fitness business’ success.

Let’s dive in.

Getting The Lowest Loan Payment For Your Fitness Business

A loan for your fitness business is a lot like a loan for your home.

You have a mortgage, and over time you buy it back, piece by piece, payment after payment.

And just like a home loan, getting the loan on good terms from the beginning is the most important thing you can do when starting a new fitness business.

After decades in the fitness industry, we’ve seen that high loan payments are unfortunately the cause of many business cash flow issues and, ultimately, business failures.

So, here are a few ways that you can reduce your business loan payments from the start.

Lower Loan Payment Tip #1: Borrow Less

The first tip is to borrow less money.

We know it sounds kind of silly, and we’d probably want to punch us in the face for this advice too.

But with a lower loan amount, you can build your gym out smarter.

It’s really easy when it’s your first fitness business to say, “I really want the waterfall.” Or… “We need these fancy electronics.”

When you opt for these expensive and unnecessary build-out costs, you’re going to be burdened with a very large loan payment.

We recommend getting a second-generation space, and trying to cut costs in every single place you can in order to borrow the least amount of money possible from the bank.

Lower Loan Payment Tip #2: Lengthen Your Terms

The second way that we recommend saving on your loan payment is to get more favorable loan terms.

The first one to consider is the length of the loan.

More often than not, we see individuals get pushed into seven-year or even five-year loan terms.

Take it from us —you want the ten-year loan term every time!

A longer, ten-year loan term will really make the payments more feasible and a lighter burden, and there’s no prepayment penalty for the large majority of loans.

For new facilities, always negotiate a payment-free period while building out your location and if possible, 6-12 more months before payments begin. If that’s not possible, we recommend a 6-12 month interest-only period to lessen cash flow demands.

Lower Loan Payment Tip #3: Improve Your Credit Score

Another way that we see business owners getting more favorable terms is by having a better credit score.

That’s right. As the owner, your personal credit score is critical!

You may not be able to get a better credit score overnight, but over a period of 30 to 90 days you can work with an accountant or a trusted financial advisor to do a few key things to make sure that your credit score is the best possible score when you apply for your loan.

If you have a poor credit score, you may still receive the loan, but unfortunately, it will come with a higher interest rate.

Lower Loan Payment Tip #4: Shop For Better Rates

We also recommend shopping around for better lenders, as well as better rates.

All lenders aren’t created equal.

There are definitely challenges with some cut-rate or discount lenders. All too often, lenders are unable or unwilling to close the loan, leaving you hanging in the middle of an expensive build-out.

They may create a lot of paperwork headaches, and ultimately, it may not be worth the savings.

So, be certain to shop rates to ensure you’re getting the best deal for your loan that’s available in the marketplace.

Lower Loan Payment Tip #5: Choose a Fixed Interest Rate

Locking into a fixed interest rate is going to be the next best course of action.

There are variable interest rates that can be a quarter or a half a point lower, but we typically recommend a fixed interest rate.

Generally speaking, if we think we expect interest rates to go up over time, then locking into a fixed rate could be beneficial. And even if rates do go down, refinancing is often a great option.

In a variable-rate loan, as rates go up over time, you’re going to see your monthly payment go up, resulting in an additional burden to you and your business.

Lower Loan Payment Tip #6: Do Not Use a Traditional Bank Loan

Our last recommendation to reduce your business loan payments is not to use traditional banks or SBA sources for your loan.

Instead, we recommend first borrowing against other assets you have, like a retirement account, or against a home using a home equity line of credit or cash-out refinance.

Home equity line of credit rates can be as low as 6%, as of the time of this writing, and borrowing from your retirement account, we’ve seen rates as low as 2.5%.

These are compared to the 9% or more offered by traditional banks and Small Business Administration (SBA) loans.

Need Help Securing Your Fitness Business Loan?

We hope you’ve gotten value out of today’s blog and can maybe save a few bucks on your monthly loan payments.

If you have any questions about how to set up your loan for the longevity of your business, please reach out.

We’d love to help.

Additionally, if there’s any chance of reconsidering or refinancing, please reach out. We’d also love to help you through that process as well.

Here at The Fitness CPA, we work solely with fitness business owners to help reduce costs and improve profits in order to help businesses succeed and grow long-term.

You can get in touch with our team by filling in our Getting In Touch page here.

Until next time!

Author
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Eric Killian

CPA & Founder | Accountant, husband, father, mountaineer.
Fitness is such a big part of who I am. Maintaining a healthy lifestyle, eating well (mostly paleo), hiking, backpacking, mountaineering, practicing yoga and Crossfit are all important cornerstones of life. But I love ice cream and cookies too much to say no!
I love helping owners make sense of their business and finding ways to grow it. It’s an honor to help you see situations, scenarios and opportunities from all sides so you can make informed decisions.

Business Ownership, Starting Up