So you have a great business idea. Maybe it’s a business you would like to buy, or better yet, you have a great business that you are looking to expand. You may need to purchase equipment, you may need more space, or you may need to hire employees. Regardless, you need cash to turn your vision into reality. So, what do you do?
Investment From Family and Friends
I believe the best way to fund your fitness business is through friends and family. Whether it’s a new business or an existing business, I’m a huge fan of having friends and family invest in my businesses. The reason is two-fold. First, your friends and family know you. They trust you. And hopefully they see your passion and believe in what you are trying to do. These are the qualities that you want in an investor. Second, you care about your friends and family and you are going to make sure you do everything possible to make your fitness business successful.
The risk with involving friends and family comes in to play if something goes wrong. To protect against this situation, I have two suggestions. Use a lawyer to set up solid documentation so that it is clear what is expected from the investment. My second piece of advice is to not be greedy. These are your friends and family and you want to treat them right. You want to make sure they get a good return so that when you look for capital again, they will want to reinvest.
Bank or SBA Loan
A second option is a good old-fashioned bank loan. These can be either a traditional loan from a bank or part of the SBA (Small Business Association) program. This is a very good option if you have assets in the business or will be buying assets. Banks like to know that if something goes wrong, they can sell those assets to recover some or all of their investment. If you own real estate or have lots of equipment or inventory, a bank loan may be a great option for you.
Also, a bank or SBA loan will typically carry a very reasonable interest rate and will be managed similar to buying a car. You will pay back principal and interest over a fixed time period.
On the downside, if you don’t have a lot of assets, it may be difficult to get cash from a bank. From my experience, this is also a very time intensive and paper intensive process. There is a lot of documentation that will be required, and it will take some time to get funded.
A third alternative is a business loan based on cash flow. An example of one company that does this type of loan is Opportunity Capital. If you already have a business that is generating cash today, and you are looking to expand, this is an excellent option. It differs from a traditional loan in that it is backed by your cash flow, so assets are not as critical for loan approval. It’s also typically a short-term loan designed to help get you through your expansion or growth period.
The biggest benefit to this type of program is that it can fund very quickly and the paperwork burden is much less. Although the interest rate will be more expensive than a traditional bank loan, the shorter duration helps minimize the total cost.
There are many other ways to fund a business, but these three are tried and true. If you have any question, please let me know. I wish you the best with your growth.My name is Jeff Gardner and I’m the CEO of Zen Planner. My greatest satisfaction comes from creating and building great businesses. My passions are fitness, technology and family.
I’ve had the opportunity to run businesses as large as $2 billion and as small as $150,000 in revenue. Throughout these experiences I have learned much. Some by taking chances, some by taking advice, and many from making mistakes. In this regular blog discussion, I’ll share my insight and experiences with the intent of helping you build a better business.
Having a strategic, established business plan in place is vital if you’re looking for funding. Have you created one for your business? If not, download our free business plan template, where we provide tips and step-by-step instructions on how to build a solid plan specific to your fitness business.