Most gym and studio purchases are financed with an SBA 7(a) loan, the buyer's equity of at least 10% of total project costs, and often a seller note; operators buying several clubs may use conventional senior debt. Lenders underwrite the membership base more than the P&L: active members over time, cancellations, dues billed against dues collected, and prepaid memberships the buyer must honor without being paid again. They also look hard at trainers who could leave with their clients, equipment that wears out, and a lease that has to outlast the loan.
- Usual financing
- SBA 7(a); conventional senior debt for multi-club operators
- Buyer equity (SBA)
- At least 10% of total project costs
- What lenders read first
- Membership reports: active members, cancellations, billed vs collected dues
- Hidden liability
- Prepaid and paid-in-full memberships the buyer must serve
- Earnouts
- Not allowed in an SBA-financed change of ownership
Dues are the asset, and lenders test them
A gym sells access by the month and collects it automatically. Lenders like that shape: next month's revenue is mostly already on file as bank drafts and card authorizations. What they cannot see from the P&L is whether the base is growing, holding or quietly shrinking while price increases hide it. So a lender underwriting a club asks for the club-management software's own reports and rebuilds the membership story month by month.
| Membership measure | What it tells the lender |
|---|---|
| Active members at each month-end, for the last few years | Whether the base is growing, flat or eroding, and how deep the seasonal swing is |
| New joins and cancellations by month | Whether the club replaces the members it loses, and what the January rush really adds |
| Dues billed against dues collected | Failed drafts and chargebacks; a wide gap means revenue on paper that never reaches the bank |
| Membership mix and price points | How much of revenue comes from legacy low-rate members, and how exposed it is to a price change |
| Members on freeze or on contract minimums | Revenue that is booked but may not continue once a term ends |
| Revenue by line: dues, personal training, classes, retail, enrollment fees | Which lines depend on staff who could leave, and which on the facility |
Enrollment fees and annual fees deserve a separate look. They arrive in lumps, often in January and in promotions, and a lender will not treat a strong promotional month as run-rate. Personal training is treated more cautiously than dues, because it follows the trainer; group classes sit in between, depending on whether the instructors or the brand draw the room.
Prepaid memberships: the liability inside the price
Many clubs sell annual or multi-year memberships paid up front, and some sold lifetime memberships years ago. The seller has already banked that cash. The buyer inherits the obligation to let those members train, with no dues coming in for them. On the balance sheet it is deferred revenue; in the deal it is a cost the buyer carries from the first day.
Lenders ask for a schedule of prepaid memberships with their end dates, and they want it dealt with in the price. In plain numbers: if members have prepaid 120 of dues for months after closing, the buyer will spend the cost of serving them without receiving that 120. The usual fix is a credit against the purchase price at closing, handled alongside the working capital peg, so that the loan is not financing cash the seller has already taken. Our page on working capital at close covers how much cushion to build in.
Ask for the prepaid-membership schedule before signing the letter of intent. It is easier to agree a price credit then than to find the liability during underwriting.
Contracts, trainers, the lease and the franchise
In an asset purchase, several things that make the gym work have to be moved deliberately.
- Member contracts. Many states regulate health-club contracts, and some require a club to register or post a bond. The purchase agreement should assign the contracts, the buyer's company should meet the state's requirements, and the billing processor has to move the drafts to the buyer's accounts without members having to re-sign. Lenders ask how that transfer will happen, because a botched billing change can cost a month of dues.
- Trainers and instructors. Trainers are often independent contractors with their own clients. If the top trainers leave, their sessions leave with them. Lenders ask who they are, what they generate, how they are paid and whether any agreement stops them soliciting clients.
- The lease. A gym needs a large, specialized space with heavy build-out that has little value to anyone else. Lenders want the lease assigned with the landlord's consent and running, with options, at least as long as the loan; see why the lease matters. A landlord waiver may also be requested so the lender can reach its equipment collateral.
- Franchise approval. Franchised clubs and boutique studios need the franchisor to approve the buyer, and may require equipment upgrades or a remodel as a condition. Those costs join total project costs. See financing a franchise resale.
The broader list of assignments and approvals is on our page about change-of-control consents.
Equipment: collateral that wears out
Cardio machines, strength equipment and flooring are the gym's main hard assets. They are real collateral, but they depreciate fast, sell used for a small share of their cost and need replacing on a cycle. Lenders handle that in two ways.
First, they deduct a normal level of maintenance capex from the cash flow they lend against. A club that has not replaced a treadmill in years is not more profitable; it is deferring a bill the buyer will pay, and a lender who tours a tired floor will adjust the numbers even if the seller's P&L does not. Second, they look at how the existing equipment is held. Leased equipment and equipment loans the buyer assumes are debt, and their payments go into the coverage calculation alongside the acquisition loan. Our pages on equipment financing versus an SBA 7(a) loan and equipment loans alongside senior debt cover how the two fit together.
How lenders size the loan
The lender starts from the tax returns and the P&L, adds back the seller's own pay and genuinely personal or one-off costs (see add-backs), then deducts a salary for whoever will manage the club and the equipment reserve. What remains is compared with the new payments.
| Step | Amount | Note |
|---|---|---|
| Club earnings before owner pay, from the returns and documented add-backs | 500 | Seller's discretionary earnings |
| Less: general manager or buyer salary | (120) | The club needs someone running it full time |
| Less: normal equipment replacement | (80) | Maintenance capex a lender will not ignore |
| Less: payments on equipment leases the buyer assumes | (50) | Existing debt that stays with the gym |
| Cash flow for the acquisition loan | 250 | |
| Annual acquisition loan payments | 200 | |
| Coverage | 1.25x | 250 divided by 200 |
SBA's minimum debt service coverage is 1.15x, and 1.0x globally once the owners' personal finances are included. From 1 October 2026, under SOP 50 10 8.1, a change of ownership must show 1.25x on historical results. Conventional banks commonly look for at least 1.25x as well.
Structuring the purchase
SBA 7(a) is the usual route for a single club or studio. It goes up to $5 million, and for a complete change of ownership the buyer's equity injection must be at least 10% of total project costs. A seller note can supply up to half of that only on full standby for the life of the SBA loan; a note that pays currently is allowed but counts as debt. Where the amount financed, less appraised real estate and equipment, exceeds $250,000, SBA requires an independent business valuation, and the loan for the purchase cannot exceed it. From 1 October 2026, financial due diligence is required on every change of ownership, and a quality of earnings report on acquisitions of $3 million or more excluding real estate.
No retention earnout. Gym sellers often propose a price that depends on how many members stay. SBA prohibits an earnout to the seller in a change of ownership it finances, so under an SBA loan the price must be fixed; the retention risk is better handled through the price itself or a larger seller note. See how earnouts interact with acquisition debt and earnout versus seller note.
Conventional senior debt fits an operator buying several clubs or adding to an existing group, where the combined business has the scale and reporting a cash-flow lender wants. Senior cash-flow lenders to lower-middle-market companies commonly lend 2x to 3.5x EBITDA, depending on the durability of the membership base and the quality of the numbers. Our pages on add-on acquisitions and deals above the SBA limit cover that route.
| SBA 7(a) | Conventional senior loan | |
|---|---|---|
| Typical buyer | Owner-operator buying one club or studio | Operator with several clubs, or a sponsor-backed group |
| Buyer equity | At least 10% of total project costs | Set by the lender; depends on leverage |
| Term | Up to 10 years for goodwill and equipment; up to 25 years for the real estate share | Usually shorter, with a balance due at maturity |
| Seller note | Counts toward equity only on full standby for the life of the loan | Subordinated on terms the lender sets |
| Earnout | Prohibited | Possible, subject to the lender's intercreditor terms |
| Guarantee | Every owner of 20% or more | Often required; negotiable at scale |
When the seller has used cash advances
Clubs that financed equipment or a slow summer with merchant cash advances show it in the bank statements as daily or weekly debits. In an asset purchase those advances are the seller's to pay off from the sale proceeds, and the lender will want payoff letters and UCC terminations at closing; see what happens to the seller's loans. SBA will not refinance an active merchant cash advance, so an advance cannot simply be rolled into the buyer's loan. A buyer who already owns a club with advances outstanding has a separate problem, covered on our page on refinancing cash advances for gyms and at MCA refinance.
The file a lender needs
Transparent's SBA acquisition checklist, with the gym-specific items lenders ask for:
- Business tax returns, 2–3 years, and the filing extension if the latest year isn't filed
- P&L and balance sheet with the latest full year of figures (never an older year), and a year-to-date P&L through last month-end
- Debt schedule, including equipment leases and loans, with copies of notes being paid off
- Personal tax returns, 2–3 years, and a personal financial statement for each buyer owning 20% or more
- The letter of intent
- Membership reports by month: active members, joins, cancellations, freezes, dues billed and collected
- The prepaid and paid-in-full membership schedule, with end dates
- Billing processor statements and bank statements
- Trainer and instructor roster with how each is paid, and any non-solicitation agreements
- The lease, the member contract form and, for a franchise, the franchise agreement
- The buyer's resume (supports Form 1919) and a use-of-proceeds narrative
With those in hand, Transparent builds the full lender package — financing model, lender presentation, blind teaser and underwriting memo — in a day; by hand, it takes at least a week. The model carries the membership trend, the prepaid liability and the equipment reserve explicitly, so a lender reads the club the way a careful buyer would. It goes to the lenders in our book whose appetite fits: 278 write SBA 7(a) and 504 and 1,148 write term and private credit. See the package, and our SBA data page for fitness centers for the SBA lending record in this industry.
Common questions
- How do lenders treat paid-in-full memberships?
- As a liability the buyer inherits. They want a schedule of prepaid memberships and their end dates, and they expect the value to be credited against the purchase price at closing rather than financed.
- Can I buy a gym with an earnout tied to member retention?
- Not with an SBA loan: SBA prohibits an earnout to the seller in a change of ownership it finances. A conventional lender may allow one, subject to its terms. Under SBA, retention risk goes into the fixed price or a seller note.
- Can the loan include new equipment?
- Yes. An SBA 7(a) loan can fund equipment along with the purchase. Equipment normally amortizes over up to 10 years, or 15 if its useful life supports it, but from 1 October 2026 a change-of-ownership loan amortizes over no more than 10 years except the real estate share. The cost adds to total project costs, which raises the 10% equity injection. Separate equipment financing is the other option.
- Do lenders care whether the trainers are employees or contractors?
- They care whether the revenue stays. Contractor trainers with their own client lists are more likely to leave with those clients, so lenders credit personal-training revenue more cautiously than dues unless the trainers are staying and bound by non-solicitation terms.
- Does a franchised studio finance differently from an independent gym?
- The loan works the same way, but the franchisor must approve the buyer, and any required remodel or equipment upgrade adds to the project. Lenders also read the remaining franchise term the way they read the lease.