How to Finance a New Fitness Studio

by Joe Schmitz on Apr 01, 2008

Create a business plan that will have investors lining up to fund your start-up fitness venture.

Are you thinking about opening your own fitness studio? There are a lot of good reasons to do so: it’s an opportunity to be your own boss, control your workplace, increase your income and have more job security. For every one of these reasons, however, there is a downside. The trouble is too few business novices—especially those whose background is fitness, not finance—ever consider the whole picture before taking the plunge.

Too often, personal fitness trainers or group instructors, dissatisfied with their current situation, decide to open a business without fully understanding the challenges that owning a business can bring. You might opt to open your own studio because you are tired of giving away most of the revenue you earn to someone else’s club, only to find out after the fact that being the boss means you have to work more hours for less money. Or, maybe it is your intention to manage your own schedule and set your own hours, only to discover that your hours now extend from 5:00 am to 10:00 pm, 7 days a week.

This litany of potential scenarios is not meant to be discouraging. You can open a fitness studio and actually attain your goals—in due course. But you need to know something about yourself and your financial solvency in order to secure financing well before you hang out that shingle.

Define Your Intentions

Here are some questions you should ask yourself as you formulate your plan to open a fitness studio:

  • Why do I want to open a fitness center? Am I clear about what the benefits will be as a business owner? Do I fully understand the costs and challenges of owning a fitness studio?
  • What kind of fitness center do I want to operate? Will it be a personal training studio, a Pilates studio, a body-mind-spirit studio that fuses different modalities or something different? What do I envision the studio will look like? How will that vision fit into the local community?
  • Who are my customers? Are they from my current niche of clients or from an entirely new demographic? What types of clients are my specialty (e.g., young athletes, seniors, the deconditioned population, sport-specific, etc.)? Do my proposed location and my facility mesh with my target clientele?

While these questions may seem simple, they are the first steps to developing a successful business plan. You might ask yourself, “Why do I need a detailed, written business plan at all?” Here are three good reasons: First, it helps you clearly define the type of studio you want to open. Second, it sheds light on any major obstacles you may face during the start-up process. Third, it helps communicate your vision to potential funding sources. Regardless of where your money is coming from, it is important that any financing partners believe that you know exactly what you are doing and that their investment is secure.

Build a Better Business Plan

There is a lot of available information on business plans. Most software retailers now offer programs for writing business plans (unfortunately, few of them are any good, as I can attest after trying out four different programs, none of which I can recommend). One great resource for novices is the Small Business Administration (SBA), which offers a free and very detailed tutorial at

As a general guideline, your business plan should include the following elements:

  • executive summary
  • body or text
  • personal finance information

Executive Summary. The summary is a 1- or 2-page overview of the proposed project. It describes the type of business and its location, identifies the owner(s) and states any anticipated financial requests.

Body or Text. Comprising the bulk of the plan, this section explains the proposed business in depth. The text should elaborate on all of the items touched upon in the executive summary. It should describe your proposed studio in detail; identify the owner(s), along with any other significant people who will be involved in the project; define your intended audience; describe the services you will offer; explain how you will be paid; identify your competition and how you will fare against them; and describe your niche in the current marketplace. The body of the plan should also cite very specifically all of the anticipated costs to open your facility and the sources of those funds.

The information should be presented in a logical manner that is within industry standards; if you do deviate from normal industry parameters, you should provide solid explanations for those deviations. For example, according to the International Health, Racquet & Sportsclub Association’s 2004 edition of IHRSA’s Guide to the Health Club Industry for Lenders & Investors, a leased fitness center will average $40–$60 per square foot in buildout costs and an additional $15–$20 per square foot in furniture, fixtures and equipment (FF&E). Any cost numbers you cite should be in line with those estimates, or you should be able to explain why your costs vary from those industry standards (e.g., if you exceed the normal opening costs of $110,000–$160,000 typically associated with a 2,000-square-foot fitness center). Your business plan should contain supporting documentation for all your proposed costs, including construction bids and quotes from equipment suppliers. This same attention to detail in documentation applies to all of your revenue and profit projections.

A note of caution here: do not show that you expect to realize huge losses or enormous profits your first year in business. Unless you can demonstrate your experience in generating similar large numbers in the past, your plan will not be credible to your readers.

Personal Financial Information. The last segment of the business plan should cover financial data for all owners, including state and federal tax returns and personal financial statements for each owner. Tax returns for the past 2 or 3 years should be complete and contain all schedules. Personal financial statement forms should also be completely filled out; be tallied properly; and include supporting documentation, such as bank statements and other account information.

When writing your plan, it is critical to keep in mind who will read the plan and what they want in exchange for funding your business. As your primary sales vehicle, your business plan needs to demonstrate how you will ultimately meet the needs of the readers of your plan—not your own needs. If your primary readers are investors or lenders, they will not care a whit about how accomplished you are, how many certifications you have or how much your clients love you. They will care that their investment is safe, that they are likely to be paid back in a timely manner and that there is potential profit for them if they invest in your studio instead of in some other business opportunity. Where most business plans go astray is by concentrating on how wonderful the business is going to be but neglecting to explain to readers how the business will meet or exceed their own needs!

For more details, see the sidebar “How to Format a Form­idable Business Plan.”

After you complete your business plan, ask for feedback. Critical eyes can help make your plan even more effective. Good sources for feedback include family members, friends, other industry professionals or an outside evaluator. For example, the SBA sponsors a mentor program called the Service Corps of Retired Executives (SCORE). This nonprofit organization provides free advice and counseling to small-business owners (

Figure Out Your Financials

When a lending institution evaluates whether to finance a project, such as a fitness studio, the owner’s financial information is one of its most important considerations. Banks, like most other third-party financing institutions, are looking for assurances that you have the ability to pay back any debt regardless of how your business ultimately performs.

While it might be tempting to inflate your financial information, it is essential that you be truthful about your assets and be able to provide backup documentation. This backup data may include recent bank and stock account statements; Internal Revenue Service forms and schedules for income verification; year-to-date wage statements; and any outside verification of income or assets that you own. Debts cited should be correct, since that information will be verified by your credit report (see below). In addition to being accurate and verifiable, all personal financial information should match other records. For example, your annual income should match what your tax return displays. It is not okay to cite a high income on your financial statement when your tax return shows a lower number. Saying, “I get paid cash under the table” is not recommended!

Conjure Your Credit Score

If you do intend to seek funding from investors, banks or other lenders, your personal credit will also be a deal maker or breaker. It’s important that you obtain your own credit report long before you speak to any potential financing sources, because credit issues can take quite a bit of time to resolve.

There are three national credit agencies (Experian, TransUnion® and Equifax®) and several regional companies. All of these companies gather information about you from numerous sources, including public records, current and past employers, and companies with whom you have or have had credit. Even though this information is about you, the credit agencies gathered the information and they consider it their property and their right to sell it to others as they choose. And the information is not always correct: according to some estimates, 52% of all credit reports have errors in them (Ramsey 1997). It is your responsibility to understand what is on your credit report and how you can use this information for your benefit.

First, obtain a copy of your credit report. Because of the recently enacted Fair and Accurate Credit Transaction Act, you can now go to and obtain a free copy of your credit file disclosure. Each of the major credit reporting agencies allows you to get one free copy of your credit report each year; they will charge you for any additional requests. (When requesting these reports, keep in mind that too many queries from outsiders can actually negatively affect your record, so plan accordingly if you recently got a mortgage or car loan.) You can also use this website or to purchase a copy of your credit record.

One large aspect of your credit record is your FICO® score, which was developed by and named for the Fair Isaac Corp­oration. A FICO score is a number that is derived after evaluating thousands of statistical data points to determine a range that shows how likely an individual is to pay his or her bills. A FICO score will range between 300 and 850—the higher the number, the better your credit.

Most people assume that only good or bad payment history affects their score. In fact, there are five general categories that factor into your FICO score, as follows:

  • payment history
  • amount owed
  • length of credit history
  • credit recently obtained
  • types of credit (e.g., car or student loans, department store balances, etc.)

Although your FICO score is important, many lenders and investors will also look at the other details in your credit information. For example, have you recently run up a lot of department store credit card debt? Do you have many recent inquiries on your credit because you just refinanced your mortgage? Do you have any tax liens or legal judgments, such as child-support payments? Do you have a history of overdue payments on credit cards or student loans? Have you faced a serious financial concern, such as a car repossession, house foreclosure or bankruptcy? These issues will not necessarily disqualify you from borrowing, but they do need to be presented in the most positive light to obtain funding.

Once you have a copy of your credit report, review it, paying attention to both the FICO score and the other details. If you discover that your credit report contains information that is in error, such as delinquent accounts that have since been paid, alert the concerned party or company to the error and go through their dispute resolution process to remove those items. Keep in mind that this process can take several months, which is why it pays to get your credit report before you try to obtain financing.

If you do have delinquent items that are unpaid, do your best to pay off the balance of the debt or come to a resolution with the party. It is important to know that if you settle with a credit company without paying the entire amount, the company will generally post that information on your credit report with a statement saying “Settled for less than the full balance.” While that may sound okay to you, for a prospective lender or investor it is often a bad sign. Be prepared to explain all unresolved items or previous challenges on your report to the best of your ability. While this may seem difficult, it is worth the effort. Remember, the lender’s goal is to protect its investment and make a profit. Your goal is to make it easy for your lender to believe that you represent the best opportunity to do that.

Find Financing Sources

Once you have your business plan and financial information in order, you need to consider your choice of financing options. Your first option is to finance the studio using your own resources. In addition to any cash you have on hand, consider the worth of other liquid assets, such as stocks, mutual funds, bonds or the cash value of an existing life insurance policy. Another personal source of revenue might be the equity in your home or even your retirement fund (but you will pay a penalty for early withdrawal). The advantage of using your personal assets as your primary source of funding is that you control the situation. No one can dictate how you allocate your assets to launch and operate your business. The downside is that you can lose those assets or, at the very least, not have access to your funds for future opportunities (e.g., sending your children off to college) or in the event of a catastrophic event. Sometimes even when there are sufficient personal resources, it is wiser to conserve your assets so that you can better leverage your net worth to meet your business’s future capital needs.

If you have few liquid assets and little net worth, you might consider bringing in a business partner with stronger financial resources who can finance the studio or provide a comfort level to your lender. As always, there is a cost and a benefit to this kind of partnership: Will the partner’s involvement help you meet your goals, or will the added ownership cost more than it’s worth in the long run?

Other excellent sources of funding are your family, friends, co-workers—even some of your clients. The advantage to this type of arrangement is that the repayment terms for the loan are often more reasonable and flexible than with conventional financing. The possible challenge to this kind of relationship is that it is personal, and any future business disagreements could cause a strain in the relationship. The success of any type of personal loan depends on your maintaining a good relationship with the individual(s) and on clearly defining the terms of the relationship so that everyone is in accord.

Securing your loan through conventional sources, such as a bank, will usually require a more formal arrangement. The terms of conventional loans can be flexible or strict, depending on the owner/guarantor’s financial credit and assets. Each financing source will present its own unique advantages and disadvantages. For example, conventional banks rarely finance new businesses, but they will often let you take out a home equity loan at an attractive interest rate. Compare that to SBA loans, which can be used for start-up costs but often require a significant amount of lead time and red tape to qualify for the funding. While there are other finance companies that do provide start-up financing, their rates and programs vary wildly, so do your homework before signing on the dotted line.

Another way to obtain funding for your studio is to use what is known as an angel investor. This can be a financially solid individual or company that seeks out small, emerging companies in which to invest. Angel investors provide both capital and advice for either a fee or a percentage of company ownership. The advantage in this relationship is that the financing terms are often flexible and tailored to your individual needs. You also gain access to a person or company that has business experience, which in itself is invaluable. The downsides are that you generally need to interview a lot of angels to find the right fit; the costs can be high; and too much advice can be intrusive.

Yet another source of funding can be through venture capital companies, which invest in both emerging and mid-stage companies. Generally, venture capitalists take equity, rather than interest, as repayment for the loan. As with the angel loans, the terms of a venture capital loan can be structured to your needs, and often there is no required payback. Instead, the venture capitalist gets paid back when your business goes public or is sold to a large company. While venture capitalists will provide money and support, they require significant share in the future equity of your business (30%–60% is not unheard of). If you intend to build a large business, this kind of relationship might be a good fit. However, you do need to consider that you may lose a sense of ownership and control in this type of arrangement.

Read the Fine Print

Regardless of where you obtain debt financing, it is critical that you (and any partner) understand all of the terms of the agreement. (This is a good time to solicit the advice of a local attorney who is familiar with the fitness industry.) You need to know the amount of money being financed; the length of the obligation; the amount of the monthly payments; the interest rate; and what to expect at the end of the financing term.

Most people focus on the interest rate of the loan, but it is also critical to calculate the total cost of the debt over the financing term—that is, how much money the debt actually costs when taking into account the amount of the monthly payments and the amount of interest paid over time.

Begin at the Beginning

If you want to open your own fitness studio, know that funding is out there for the taking. But in order to get the best financial package, you need to do your homework. Develop a great business plan and subject it to intense scrutiny. Know that different financial sources will look for different elements and assurances during their decision-making process. Yes, your mom might want only what’s best for you, but that stalwart banker will want to know exactly how much real estate equity you can pledge. (You will have to decide which of these financial sources will cost you the most in the end!)

Be prepared to talk to multiple financing sources, but keep in mind that you can control the process and you can present your credit information in the best light. If a particular funding partner isn’t interested, don’t get upset. Instead, find out why your loan application was rejected so that you can address those concerns before you go on to the next potential financial partner. If you understand and plan during this process, good things will happen.

SIDEBAR: Handling Credit Disputes

Once each year, you can get a free copy of your personal credit report from each of the three national credit agencies: Experian, Equifax and TransUnion. If you determine that your report is in error, you should first contact the company with which you have the credit dispute and attempt to resolve the issue. If your phone call is successful, make sure you also get a written confirmation of the agreement that notes that the problem was resolved and that the agency will notify the three appropriate credit reporting agencies. Even after the agencies are contacted, it can take 30–90 days for the items to be changed on your credit disclosure file. (This is why it is essential to allow sufficient lead time before looking for funding!)

Your next recourse if the issue is not resolved is to contact the credit reporting agencies directly and work through their dispute resolution process. Each credit-reporting agency has a different process, but you usually need to describe the nature of the dispute in writing, using the agency’s own formula; in turn, the agency will send that written document to the company at issue. The company then generally has a set amount of time to respond and show its own supporting evidence. Finally, the credit agency will valuate the information and decide what information should be retained in your credit disclosure file.

Your final recourse if you disagree with the resolution is to request that a brief statement be placed in your credit report that expresses your disagreement.

You can contact the credit agencies as follows:

  • Equifax:; (877) 576-5734
  • Experian:; (888) 397-3742
  • TransUnion:; (800) 680-7289

For more information about your rights and responsibilities regarding your personal credit information, contact the Federal Trade Commission, Bureau of Consumer Protection, at

SIDEBAR: Timeline for Success

As with many endeavors in life, it pays to have a timeline when opening a fitness studio. The key to hitting these milestones is to be aggressive! As they say, it’s all in the details. You will need to be diligent and continually question everyone involved in the project (e.g., contractors, landlord, lenders, equipment manufacturers, etc.) to make sure they are doing what was promised.

Each fitness studio will require different milestones to achieve its grand opening. However, if your studio is projected to be from 1,500 to 5,000 square feet, here are some general timelines you can use for planning purposes:

12–18 Months Before Opening

  • Begin planning and get feedback.
  • Start your business plan.
  • Decide on the type of studio and the demographics of your clientele.
  • Estimate start-up and operating costs.

6 Months Before Opening

  • Finalize your business plan and all your personal financial data.
  • Resolve any outstanding issues in your credit report.
  • Actively scout locations.
  • Line up financing.
  • Resolve all permitting, licensing and legal issues.

3–4 Months Before Opening

  • Negotiate and finalize terms for leasing space.
  • Secure funding.
  • Begin any necessary building projects.
  • Implement your pre-sales marketing plan.
  • Get the word out to clients and other trainers.
  • Interview prospective employees.

1 Month to 1 Week Before Opening

  • Finish your grand-opening plan.
  • Finalize your advertising plan.
  • Follow up on all last-minute details.

SIDEBAR: How to Format a Formidable Business Plan

In addition to the technical elements, such as financial data, outlined in your business plan, you also need to consider the format and layout, which can make a good plan that much better—and a bad plan end up in the reject file!

Your business plan should be clearly written and specific, without a lot of reliance on industry terminology. (Your banker won’t know that “having a full book of business” means you have a lot of clients and those clients will join you at your new facility.) The size of the text should be large enough to be easily read; use short, concise sentences broken into multiple paragraphs per page (this is easier on the eye of the reader).

The financial data (wage and other income statements, descriptions of start-up costs, etc.) should also be easy to read. Above all, take the time to check and recheck all your numbers to ensure that they add up and make sense. Avoid overuse of acronyms (like IHRSA), as this can look like alphabet soup to industry outsiders; if you must use an abbreviation or acronym, be sure to spell it out on first use. Don’t include too many graphs or tables; if you do use a tabular format, make sure the columns and footnotes are understandable and logical to someone who is unfamiliar with your industry.

Joe Schmitz is an accredited certified lease professional (CLP) and the president of F.I.T. Leasing, a national company that provides equipment leasing and capital loans to small businesses. A former personal fitness trainer and small health club operator, he has been providing financing for existing and start-up fitness centers since 1990. He can be reached at or (800) 299-4348.


Ramsey, D. 1998. The Financial Peace Planner. New York: Penguin.

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About the Author

Joe Schmitz

Joe Schmitz IDEA Author/Presenter

Joe Schmitz is an accredited certified lease professional (CLP) and the president of F.I.T. Leasing, a national company that provides equipment leasing and capital loans to small businesses. A former personal fitness trainer and small health club operator, he has been providing financing for existing and start-up fitness centers since 1990. He can be reached at or (800) 299-4348.