(Editor's Note: Sign up for Paul Bosley's session, "How to Finance Your Fitness Center," at the Club Industry Show at 11 a.m. on Oct. 22.)

The most consistent funding source for financing within the fitness industry during the last five years has been loans guaranteed by the Small Business Administration (SBA). During the past five years, the fitness and recreation industries received $1 billion in various SBA loans, according to the SBA media desk in Washington, DC.

So why should you consider an SBA loan? These types of loans offer four benefits:

1. Flexibility. SBA loans can be used to purchase real estate, capitalize a new startup business, refinance debt and/or provide capital to expand an existing business. In the case of a startup or an expansion, SBA loans can be used to finance a real estate acquisition or to finance a portion of the buildout for leased space. Consequently, SBA loans are flexible for your specific business needs.

2. Unbeatable financing terms. The terms of SBA 504 loans that finance real estate are typically 20 years. Unlike many commercial real estate loans, there is no balloon payment so that all payments over the term of the loan include principal and interest. The terms of the SBA 7(a) loans that finance real estate purchase or construction are typically 25 years. Those that do not involve financing the purchase of real estate can range from seven to 10 years. Interest rates vary based upon the prime lending rate at the time of closing plus some spread that is based upon the strength of the borrower(s). As a general rule, the interest rates for SBA loans are no greater than 2.75 percent over the prime lending rate as published in The Wall Street Journal. That rate currently is 3.25 percent. Consequently, today's 6 percent lending rate is at an historic low.

3. Improved approval potential. The SBA program is designed to spread the risk of the loan between the lending bank and the SBA. Depending upon the type of loan (504 or 7A), the SBA will assume a percentage of the risk so that the lending bank is only putting at risk the portion of the loan that the SBA does not guarantee. All SBA loans are secured by the borrower with some collateral that varies by the loan type. Additional collateral can be the business itself, personal real estate or marketable securities so that an SBA loan is secured by the borrower and by the SBA, which enhances the chance that the loan application will be approved. In the current business environment, many lenders are risk adverse so this is an important element of an SBA loan. Terry Crispen, the vice president of Celtic Bank, wrote: "We have streamlined the SBA loan process to provide working capital solutions that fit the needs of today's small businesses. Most small businesses need working capital. However, a large number of these businesses have been unable to obtain financing because they are either too small or they lack the collateral that most banks require for financing."

4. SBA fees waived. Small business owners now have an even better incentive to tap into long-term, SBA-guaranteed financing, and interest rates are now at an all-time low. The fee savings as a result of the temporary waiver on all loans $150,000 and below will assist small businesses in retaining their capital, which will help sustain and grow their business.

With the many benefits of SBA loans and a track record of more than 5,000 SBA loans being funded in this decade alone, the fitness industry has been and should continue to be the benefactor of this important funding source.

SBA Programs Most Likely to Be Used by an Owner of a Fitness Center

BIO

Paul Bosley is the executive vice president of First Financial, which offers market leasing and finance programs to national vendors in the health club, golf and dental industries. Bosley is a volunteer financial counselor for the Fort Lauderdale Chapter of SCORE, a non-profit funded by the Small Business Administration. He is attending Florida Atlantic University working on his second degree in accounting. Prior to joining First Financial, Bosley was the vice president of public relations of Q The Sports Clubs. He can be reached at paul@ffcash.net.