The
best financing option for gyms and health clubs -merchant cash
advance
Gymming
and taking care of your physical health is a good habit that is
increasing in popularity nowadays. To cash in on this popularity
there is a spurt of health clubs and fitness centers across the
country. But how many of them are able to sustain and become
profitable? Maintaining a gym is not an easy task; you have to invest
in good quality ventilation system to prevent circulation of stale
air full of harmful carbon dioxide which is detrimental to the
patrons’ health, all the equipment must be serviced and in good
working condition, all gym tools must be disinfected on a regular
basis to prevent spread of disease.
If
you own a health club or a fitness center then it is your priority to
provide a safe environment to your patrons as they pursue their
exercise goals. To stay atop competition you must invest in quality
maintenance and upkeep of the center. In addition to that, you may
want to remodel the gym, introduce more classes, recruit more
trainers and maybe include a small eatery too. All this will increase
your overheads and you will need a working capital to deal with these
expenses.
Traditionally,
you might approach a bank for a loan for but nowadays small business
financing is a tough game wherein several lenders refuse to loan
money without any collateral or any other form of personal guarantee.
Acquiring bank loans is even tougher as the sanction process is long
and tedious requiring cumbersome documentation. What is the solution?
Alternative
funding solutions
With
the advent of the internet, there are several online and offline
lenders that specialize in unsecured loans. Most of these unsecured
loans do not need collateral and are easy to process. The credit
limit is usually around $500,000. This limit is reached by analyzing
the borrower's credit score, nature of the business, the probability
of growth and profit. New businesses can expect anywhere between
$25,000 to $100,000. While established centers can expect up to
$500K.
What
should I do if I have a bad credit?
Not
everyone has clean credit scores and hence face difficulties to
secure commercial loans. This is where Merchant Cash advance steps
into the picture. These are lenders who lend you finance in a very
short time not only without any collateral but also if you have a bad
credit. There are specialized merchant accounts for gyms, fitness
centers, health clubs, golf centers, sports facilities, sports
complexes and even recreational complexes with loans designed
exclusively for that industry.
What
is MCA and why is it the best option?
Merchant
cash advance is a system wherein a lender lends money to a borrower
in return for a fixed percentage of the future credit card sales.
This short-term loan is a very desirable form of small business
financing because it is a very simple system where the borrower
agrees to pay the full sum unconditionally at some time in the
future. The repayment is based on the success and failure of the
business; in case a business is successful the MCA gets all its money
back but in case a business fails, then the provider cannot claim
anything from the borrower.
Unlike
a traditional loan where the borrower is burdened with a fixed loan
amount which puts a severe strain on the liquid cash, in MCAs you
repay a fixed percentage which will vary with the daily income of
your gym. And the best part is that you get cash upfront which gives
you a working capital to get going – so even as you pay back your
loan you can make profits and hope to expand your fitness center.
On
what basis is the payback calculated
The
total payback amount is calculated based on factor rate. It is
calculated only once unlike interest rates which keep changing with
the depreciating capital. This rate is calculated by dividing the
total financing cost by the loan amount. It is usually a decimal. For
example, if you borrow a loan of $50,000 at a factor rate of 1.3 for
a period of 12 months then the final payback amount will be 1.3 times
$50,000 which is $65,000.
The
main purpose of a factor rate is to compensate the lenders for the
risk they take by providing you quick cash without any collateral or
personal guarantee. This rate is determined by the creditworthiness
of your business.
While
the overall payment does seem hefty you must not forget that business
cash advance saves you precious time which might otherwise be wasted
on waiting for a traditional loan from a bank or other lenders.
How
can you qualify for a merchant cash advance loan
You
must be fairly well established to avail loan
Your
business must accept credit card for all transactions
You
must provide previous credit transactions and an estimate for future
transactions.
What
if I need additional funding
Sometimes
a situation may arise where the loan from the merchant cash advance
may not suffice; there are alternative funding solutions in this
scenario which are different from the regular bank loan alternatives.
You can look at the the1st
position, 2nd
position, 3rd
position, 4th
position and even 5th
and 6th
position cash advance. These are cash advances which are given at
higher interests. These lenders know that they can stake claim should
the business fail only after the preceding position has had his
share, often this will amount to nothing. You must take this route
only and only if all other alternatives are shut.
Conclusion
Running a
successful gym or health or fitness center with state-of-art
equipment is not easy. Most of the high-end equipment are high
maintenance and require immediate attention if they break down. It is
at such times that small businesses need working capital to cover the
costs of repair and replacement of any spare parts which are often
expensive. Or there could be a leak from the air conditioning or the
security system might have broken down; the number of problems you
can encounter may be various and everything requires finance. High
NSFs, bad credit notwithstanding you can avail a cash advance with no
collateral whatsoever. Reach out to the nearest MCA provider in your
area and plan to expand your fitness center.
