Can I get a commercial mortgage to open a gym?
We get lots of enquiries from gym instructors seeking advice about how to get a commercial mortgage to open a gym. Finding a lender willing to approve your loan can feel frustrating, especially without the right advice on where to begin your search.
Whether you’ve owned a fitness studio in the past or you’re just an ambitious trainer with dreams of starting a new business, this guide aims to help you. Feel free to send your questions to our experts via our online chat if there’s anything you feel unsure about.
What is a commercial gym mortgage?
There aren’t necessarily commercial gym mortgage products but some lenders specialise in certain industries and are more open to loaning for similar business ventures or properties.
When a lender approves a commercial mortgage to open a gym, they provide terms and conditions within the agreement which the borrower must meet such as the repayment amount, term time and interest rate.
As with a residential mortgage, a lender will want to see that you can comfortably afford your repayments.
Therefore, you’ll need to persuade them that your gym or fitness studio will be profitable which is why lenders will ask to see:
Your business plan with detailed accounts of how you’ll spend the loan
Your experience as a gym instructor, personal trainer or gym owner
Your recent and past bank statements
Your credit profile (business and personal).
How much could I borrow to open a gym in the UK?
Most commercial mortgage lenders in 2020 require a minimum 25% deposit, with some asking for higher amounts depending on the associated risk.
If the premises for the gym you wanted to buy was valued at £100,000, under the above terms, you would be required to pay a £25,000 deposit.
Finding a lender willing to provide 100% of the value of the property you want to buy will be tasking, though not impossible.
If the lender deems that the risk of loaning to you is low because of your income or perhaps a secured asset, they may be more open to lending higher loan-to-value rates.
How long does a commercial mortgage last for a gym?
A commercial mortgage can span between 3 to 25 years, although every application will be assessed separately and so the term length for your own agreement may differ.
Some gym owners prefer shorter loan repayment terms because ultimately, this will usually result in paying less interest overall and is better for business.
Short term loan alternatives such as bridging loans can come with higher interest rates, so although these types of loans can be repaid quicker, they can present greater financial risk.
Can I get a commercial mortgage to start a new fitness business?
If you’ve never owned a gym facility before and you want to apply for finance, lenders are likely to assess the risk you pose to them as high. That’s because as a start-up business, you won’t have accounts to prove your reliance as a borrower or as a businessperson.
Some fitness experts who are just starting out may find that there are lenders who won’t consider them at all but thankfully, there may be other lenders elsewhere who are able to help.
First-time borrowers can sometimes be charged a higher rate of interest which is why working with a broker who can compare the market on your behalf can be real relief.
They can do the hard work for you, scouring the options and checking contracts for any unfavourable terms which could make your loan unaffordable in the future.
Can I get a commercial gym mortgage with bad credit?
While it’s possible to apply for a commercial mortgage with bad credit, you may find that your choice of lenders will be reduced as agin, the risk of lending is perceived as greater.
Your credit report is just one factor that commercial mortgage lenders will assess when deciding to provide you with a loan to open your gym, so don’t be disheartened if your score is poor.
There are also things you can do to improve your low credit score which can increase your appeal as a borrower.
What costs are there to consider when opening a gym?
Sometimes business owners take out a commercial property mortgage in conjunction with a business loan in order to offer additional financing, either to secure the property they need or to pay for other costs associated with opening and running a new hairdressers such as:
Staff (if relevant)
Equipment such as benches, weights and treadmills
Air conditioning (if needed)
Marketing costs for a website or advertisement to bring in customers
Security for the building such as CCTV
Business loans can range anywhere between £5,000 - £1,000,000 and can be secured or unsecured. Generally, lenders ask for security if the loan exceeds a certain value as a way to mitigate risk.
Is a commercial mortgage for a fitness studio a good idea?
Opening a new gym is a big step that could affect your future finances, so always
Research the building you want to buy and consider the location
Does it have parking for your clients and is street lighting available for your evening class clients?
Speak to other gym owners about their experiences
Always seek professional advice about your mortgage
The rate you pay for your commercial gym loan affects your repayments and monthly outgoings as a business, so never apply for a mortgage on a whim. Always check your eligibility ahead to avoid negatively affecting your credit score.