Leisure business finance for gyms, salons, attractions and personal services

Leisure business finance usually combines two or three facilities: asset finance for the equipment that earns the money, a term loan or fit-out facility for the work on the premises, and a flexible facility for seasonal swings. Lenders like equipment they can recover and resell, and they like card or membership income they can see arriving every day. They are more cautious about spending that cannot be repossessed, such as building works in a leased unit, and about income that depends on good weather or a handful of peak weeks.

Leisure business finance suits operators with at least a year or two of trading, a lease long enough to cover the borrowing, steady card or membership income and owners with relevant experience. Expanding operators with a proven first site are often strong candidates.

It is harder for brand new sites with no trading record, businesses on short or expiring leases, and operators whose income is concentrated in a few weeks of the year. Start-ups may still fund equipment through asset finance, with the kit as security, but usually need a personal contribution towards fit-out.

Asset finance, merchant cash advances and unsecured loans can see decisions within a few working days in straightforward cases. Fit-out funding takes longer where lenders want to see contractor quotes and lease terms, and property purchases follow the usual valuation and legal process. Timings depend on the lender and the case.

Asset finance is secured on the equipment. Merchant cash advances and unsecured loans for limited companies usually carry personal guarantees from the directors. Fit-out lending may need a debenture or additional security because the works themselves have little resale value. Check whether any guarantee is capped and what it covers before signing.

Asset finance is priced into fixed monthly rentals, sometimes with a deposit and a final option fee. Unsecured loans charge interest plus an arrangement fee. A merchant cash advance charges a fixed fee on the amount advanced, repaid as a share of card sales, so the effective cost depends on how quickly it is repaid. Revolving facilities charge interest on drawn balances plus a fee for the limit.

Membership presales, deposits on bookings and annual passes can fund part of a new site or season. Equipment suppliers sometimes offer their own payment plans, and landlords may contribute to fit-out in return for a longer lease. Our article on seasonal business finance looks at managing the quiet months.