Worked Example: SBA 7(a) Gym Feasibility Study in Hawaii

This is a worked example, not a client engagement. It takes a new independent fitness facility of 15,000 assumed square feet, built out in leased flex or light-industrial space in West Oahu and financed with an SBA 7(a) loan for leasehold improvements, equipment, pre-opening costs and working capital, and walks through what a feasibility study for that loan would have to test. Every market, tax and program figure is sourced to a public publisher and every project figure is a stated assumption. No gym, brand, landlord, lender or address is named; West Oahu is context, not a site.

At a glance. A 15,000 square foot assumed fitness facility in leased flex space in West Oahu, with a total project cost of $3,547,326, financed with a $2,660,495 SBA 7(a) loan on a 10-year term and $886,832 of borrower equity (Table 4). At the assumed 1,900 members paying assumed average dues of $89.00 a month, stabilized coverage is 1.23x against an assumed 1.25x lender minimum, year 1 is negative, year 2 is 0.77x, and the two-year shortfall exceeds the assumed $450,000 ramp reserve by $132,546 (Tables 6, 8 and 11).

• Total project cost: $3,547,326
• SBA 7(a) loan (10-year term): $2,660,495
• Borrower equity: $886,832
• Stabilized cash flow available for debt service (year 3): $513,455
• Debt service coverage, year 3: 1.23x
• Break-even members at 1.00x coverage: 1,801
• Members needed for the 1.25x lender minimum: 1,909

What a Feasibility Consultant Tests First on an SBA 7(a) Gym Loan

The lender's question on an independent gym is whether a new club with no operating history, in a building it does not own, will sign and keep enough members at a dues level the local market will pay to carry a 10-year loan from the month it opens. The Health & Fitness Association's 2025 Fitness Industry Benchmarking Report put member retention at 66.4 percent for the year, so about a third of members had to be replaced ^[1].

Nothing in the budget is real estate, so there is no appraised building behind the loan and the term is short: 13 CFR 120.212 holds a 7(a) term to the shortest one the borrower's ability to repay allows, ten years or less unless the loan funds real estate or equipment lasting longer than ten years ^[2]. The example amortizes the whole loan over 10 years, which is why Table 8 shows $417,496 of annual debt service on a $2,660,495 loan.

The first test is coverage. Table 8 prints $513,455 of cash flow available for debt service in the stabilized year against $417,496 of debt service, a coverage of 1.23x, below the assumed 1.25x lender minimum. Per the site's own SBA program page, standard 7(a) loans carry a 1.15x floor ^[3], and the 1.23x meets that floor but not the lender assumption, so the 1.25x lender minimum is the higher of the two and is the one that binds. 13 CFR 120.150 asks for loans whose repayment is reasonably assured, made under the prudent credit analysis a lender applies to its similarly sized non-SBA loans ^[4]; that rule sets no coverage ratio, and the SBA operating procedure itself was not opened here.

The second test is the ramp. Table 6 shows the club losing $67,392 before debt service in year 1 and covering 0.77x in year 2, and Table 11 shows the two years of shortfall after debt service totalling $582,546 against the assumed $450,000 reserve, leaving $132,546 for the sponsor to fund. Hawaii's health club law makes this harder: HRS 486N-10 requires all money a club receives under health club contracts before it is fully operative to sit in a separate escrow account, not used for construction or operation ^[5], so presale dues cannot carry the build-out.

The third test is the lease: Table 9 shows the same club in retail space at negative 0.52x coverage.

Decision. Coverage, not loan-to-cost, would size the loan; the 1.23x base case would be shown as a shortfall against the binding assumed 1.25x lender minimum, and the study would treat the member count, the dues level, the lease and the ramp reserve as the four things to be proved.

The Site and Its Market in Hawaii: Why West Oahu Flex Space

The example is placed on Oahu because that is where the people are. Census Vintage 2025 estimates put Honolulu County, which is the island of Oahu, at 988,703 residents on July 1, 2025 ^[6], against 210,043 in Hawaii County ^[7] and 160,592 in Maui County ^[8]. No neighbor island offers a trade area of that density for a club of 15,000 assumed square feet.

The population is not growing. The same Census series puts the state at 1,432,820 on July 1, 2025, about 1.5 percent below its April 1, 2020 base of 1,455,267 ^[9]. Honolulu County's 988,703 residents compare with a 2020 base of 1,016,504, about 2.7 percent lower ^[6]. In the year to July 1, 2025 the county fell 1,439, with natural increase adding 1,864 and net international migration 3,431 while net domestic migration took away 6,682 ^[10]. Hawaii County is up about 4.7 percent since 2020 ^[7], but too small for the format.

Income is the counterweight. Census Small Area Income and Poverty Estimates published in the State of Hawaii Data Book 2024 put 2023 median household income at $102,382 in Honolulu County, against $96,716 statewide and $73,092 in Hawaii County ^[11]; the same series put Honolulu County at $90,176 in 2021 ^[12].

Flex rather than retail is a rent question, and Table 1 carries the public benchmarks. Colliers International figures published in the State of Hawaii Data Book 2024 put the Oahu industrial average asking base rent at $1.53 per square foot per month at December 31, 2024 with pass-through operating expenses of $0.51, up from $1.24 and $0.45 at the end of 2020 ^[13]. The model's assumed $1.75 base rent sits above that island average to allow for rent growth since the end of 2024, and its assumed $0.55 pass-through just above the $0.51 expense figure.

Retail costs far more. Colliers International figures in the same Data Book table put the Oahu retail average asking base rent at $4.62 per square foot per month at the end of 2024, with pass-through operating expenses of $1.74 and vacancy of 5.71 percent ^[14]. No public, republishable rent for a large retail box could be sourced for this example, so the retail column in Table 9 uses those Colliers International averages ^[14]; they are driven by shop space, and a box of 15,000 assumed square feet may lease below them.

Finding the space is a vacancy question. Colliers International figures in the State of Hawaii Data Book 2024 put Oahu industrial vacancy at 0.93 percent at December 31, 2024 ^[13]; a market that tight does not readily hand a new tenant a 15,000 square foot assumed box. West Oahu is an assumed location: its industrial rent, vacancy, availability and construction pipeline could not be sourced from a public, republishable source for this example, so a study would establish them from current listings.

Decision. The study would place the club in flex space, confirm West Oahu against current listings, present the retail alternative as a coverage-destroying scenario, and carry zoning for a fitness use in an industrial district as an unresolved site risk.

Demand for an Independent Gym on Oahu

The national base is large and growing. The Health & Fitness Association's 2026 US Health & Fitness Consumer Report found that 81 million Americans belonged to a gym, studio or other fitness facility in 2025, an all-time high and 5.2 percent more than in 2024 ^[15]. The Health & Fitness Association reported that 26.1 percent of the U.S. population aged six and older was a member in 2025 ^[16], and that the share of members who did not use their membership at all fell to 4.6 percent ^[17].

The shape of demand supports the floor plan. The Health & Fitness Association reported that free weight use has grown faster than any other equipment category since 2021 ^[18], which is why the assumed $600,000 of fitness equipment is weighted to strength and free weights. The Health & Fitness Association reported yoga as the most widely practiced facility activity in 2025 at 17.7 million members, with Pilates and tai chi growing steadily, and described a durable shift toward strength, social and mind-body formats and away from some traditional high-intensity and stand-alone cardio options ^[19]; the two group studios and the recovery area follow that shift.

The most recent reading is steady rather than strong. Placer.ai foot-traffic data reported by the Health & Fitness Association's FIT Tracker show average visits per U.S. fitness facility up 1.3 percent year over year in the third quarter of 2026 ^[20]; within that, the Placer.ai data the Health & Fitness Association reports show boutique studios up 1.9 percent, high-volume low-price gyms up 1.5 percent and mid-priced gyms up 1.4 percent ^[21], and an independent club at the assumed $89.00 dues sits between the mid-priced and boutique segments.

Pricing is where the example takes its largest position. The Health & Fitness Association's 2024 consumer report put average U.S. fitness facility dues at $65 per month in 2023, up 9 percent ^[22], and the Health & Fitness Association found that almost 67 percent of members paid on average less than $50 per month, far below the assumed $89.00 here ^[23]. The Health & Fitness Association also found that higher-end facilities charging $100 or more per month grew their membership 7.9 percent from 2022 to 2023, outpacing the overall segment growth rate of 5.8 percent ^[24]. The assumed $89.00 average, which includes general excise tax passed on to the member, sits between those tiers, and the justification is Honolulu County's median household income of $102,382 in 2023 ^[11]. No Hawaii dues survey was sourced, so a study would test the assumed $89.00 against the posted prices of the clubs in the trade area.

The member count is the other large position. The example assumes 1,900 average members in the stabilized third year, 1,300 in year 1 and 1,700 in year 2. The only anchors are national: the Health & Fitness Association's 26.1 percent penetration ^[16] and Honolulu County's 988,703 residents ^[6] say the island holds a large member population, not that this club would hold 1,900 assumed members of it. West Oahu's population was not sourced; a study would draw the drive-time trade area and apply a capture rate it can defend.

Operator economics give the margin a benchmark. The Health & Fitness Association's 2025 Fitness Industry Benchmarking Report, drawn from 175 companies operating more than 17,000 facilities ^[25], found a median EBITDA margin of 23.6 percent for 2024 ^[26]; Table 7 shows the example's stabilized margin before the replacement reserve at 23.2 percent, just under that median, and 20.2 percent after the assumed 3.0 percent reserve.

Decision. The study would build demand from a trade-area household count and a capture rate, hold the assumed 1,900 members and assumed $89.00 dues only if a competitor price survey supports both, and present the national figures as context, not as evidence that this club fills.

Competition: What Is Known and What Is Not

No count or list of competing gyms on Oahu was sourced for this example; that absence is the largest gap between this worked example and a study a lender could act on. A study would build that table itself: every club, low-price gym, boutique studio and military or hotel fitness center in the drive-time area, with its size, posted dues, enrollment fee and offer. The assumed 1,900 members and assumed $89.00 dues both stand or fall on that table.

What the sourced data do say is where the pressure would come from. Placer.ai foot-traffic data reported by the Health & Fitness Association show high-volume low-price gyms growing visits per location 1.5 percent and boutique studios 1.9 percent in the third quarter of 2026, against 1.4 percent at mid-priced gyms ^[21]. The Health & Fitness Association's finding that almost 67 percent of members paid less than $50 a month in 2023, well under the assumed $89.00, describes the price point most competitors are likely to sit at ^[23].

Competition also arrives as the building next door: a flex building that can hold one gym can hold a second, and the Oahu retail vacancy of 5.71 percent that Colliers International reported at the end of 2024 ^[14] is space where a national chain gym would land. New flex construction in West Oahu could not be sourced from a public, republishable source for this example.

Decision. The study would treat the absence of a competitor census as disqualifying for a lender's purposes, would price the club against posted dues in the trade area before accepting the assumed $89.00, and would treat any new flex supply in West Oahu as a source of competitors as well as of space.

SBA Lending Record for This Asset Class in Hawaii

Loan Analytics keeps a loan-outcomes dataset built from the SBA's own loan-level 7(a) and 504 files ^[27]. For this example's state and asset class it covers SBA loans approved in fiscal 2017 to 2026 to businesses coded to fitness center, with the project in Hawaii. The figures are the SBA program's record in the state, not Loan Analytics' work and not this hypothetical project.

Cost Basis: Leasehold Improvements, Equipment and Working Capital

Rounded to the dollar; lines may not foot by $1.

The budget has no land and no building. Table 4 builds total project cost of $3,547,326, or $236 per square foot, from nine lines, every one an assumption except the guaranty fee the rule computes from the others.

The largest line is the fit-out. Leasehold improvements of $1,800,000 in Table 4 are the assumed $120 per square foot across the assumed 15,000 square feet, net of the landlord's allowance. Rider Levett Bucknall's indicative Q3 2026 construction costs for Honolulu run $300 to $495 per square foot for strip retail, against $200 to $265 in Austin and $200 to $270 in Dallas ^[37], stated by Rider Levett Bucknall as hard construction costs per square foot of gross floor area ^[38]; those are whole-building costs, and the assumed $120 is a fit-out of an existing shell that a contractor would price. Rider Levett Bucknall's Honolulu construction cost index rose 6.49 percent from July 2025 to July 2026 ^[39], against 4.16 percent for Los Angeles ^[40], so an old bid is a stale one.

Equipment is the second block: the assumed $600,000 of fitness equipment, weighted to the free weights and strength category the Health & Fitness Association reports growing faster than any other since 2021 ^[18]; the assumed $140,000 of recovery equipment; and the assumed $110,000 of furniture, access control, audio-visual and IT. 13 CFR 120.120(a)(6) lets 7(a) proceeds acquire, by purchase or lease, and install fixed assets ^[41], and 13 CFR 120.120(a)(4) lets them convert, expand or renovate one or more existing buildings ^[42], so the fit-out and the equipment are eligible uses.

Soft and pre-opening costs follow: the assumed $150,000 of design, engineering and permits; the assumed $140,000 of pre-opening payroll, training and marketing; and the assumed $85,000 of third-party reports, closing and financing costs, one combined line. The pre-opening line is financed rather than paid from presale cash because HRS 486N-10 requires presale receipts to sit in escrow, separate from any account used for construction or operation ^[5], released only when the club becomes fully operative ^[43].

The most argued line is the assumed $450,000 of working capital and ramp-up reserve. 13 CFR 120.120(b) lists working capital among the uses of 7(a) proceeds ^[44], which is why this is a 7(a) example rather than a 504 one.

The sources of funds are a rule and an assumption. The loan is sized at an assumed 75 percent of total project cost, $2,660,495, because a new business with no real estate collateral would be asked to invest the rest, and the SBA guaranty on a loan of more than $150,000 may be at most 75 percent under 13 CFR 120.210 ^[28], giving the guaranteed portion of $1,995,371 in Table 4. The assumed fee is the statute's ceiling: 15 U.S.C. 636(a)(18)(A)(iii) allows, as the assumed rate here, not more than 3.5 percent of the deferred participation share on a loan above $700,000 ^[45], and clause (iv) adds 0.25 percent of only the part of that share above $1,000,000 ^[30]. The regulation, 13 CFR 120.220, reads the extra 0.25 percent as applying to the guaranteed portion of any loan above $1,000,000 ^[29]; that wording departs from the statute, and the example takes the statutory ceiling. The $72,326 in Table 4 applies that ceiling to the guaranteed portion and finances it in the loan; the fee SBA sets for fiscal 2026 by notice was not fetched, so the figure is the ceiling, not the fee a lender would charge. Borrower equity is $886,832, 25.0 percent of total project cost (Table 4), the assumed share.

Decision. The study would carry the fit-out as a contractor-priced figure, keep pre-opening costs inside the financed budget because the escrow rule bars presale cash from the build-out, and state the guaranty fee as the statutory ceiling.

Revenue Build: Members, Dues and the Ramp

Revenue is dues first and everything else as a share of dues. Table 5 shows the stabilized year: the assumed 1,900 average members at the assumed $89.00 a month give $2,029,200 of membership dues; personal and small-group training at an assumed 18 percent of dues adds $365,256; recovery add-ons, retail and day passes at an assumed 6 percent of dues add $121,752; and enrollment fees of $31,282 come from the 638 members replaced in the year at the assumed $49 each, the replacement count driven by the Health & Fitness Association's 66.4 percent retention benchmark ^[1]. Total revenue is $2,547,490, or $111.73 per member per month.

Two Hawaii rules sit inside those lines. The dues are stated inclusive of general excise tax because the tax is on the business, not the customer, and a seller may visibly pass it on but is not required to ^[46]; a business that does may charge up to a maximum visible rate of 4.7120 percent on Oahu ^[47]. The contract terms are also constrained: HRS 486N-8.5 requires any health club contract longer than one year to be paid in installments with no more than 20 percent of the price up front ^[48], HRS 486N-8(a) caps the unexpired aggregate term of a buyer's contracts at 36 months ^[49], and HRS 486N-8(b) bars automatic renewal clauses ^[50]. The revenue build therefore assumes monthly dues throughout.

The ramp is where the example is weakest. Table 6 assumes 1,300 average members in year 1, including presale members carried into opening, 1,700 in year 2 and 1,900 at stabilization. Year 1 revenue of $1,743,019 falls short of year 1 operating expenses and reserve of $1,810,412, so cash flow before debt service is negative $67,392 and coverage is negative 0.16x. Year 2 revenue of $2,279,333 against expenses of $1,959,494 gives $319,839 of cash flow and 0.77x coverage. Only in year 3 does the club cover its debt, and then at 1.23x.

The presale that would normally shorten the ramp is constrained in Hawaii. HRS 486N-10(b) requires every health club contract to promise that the club will be fully operative on a specified date no later than one year after the buyer signs ^[51], so presale cannot begin until the opening date is certain; HRS 486N-6 gives the buyer a five business-day cancellation right ^[52], with a refund of the consideration paid less the fair market value of services actually used ^[53]. A study would count presale members for the opening month but not their cash toward construction.

Decision. The study would present the assumed 1,300, 1,700 and 1,900 member ramp as the central forecast to be defended, and would show the lender the year 1 loss rather than smooth it.

Debt Service Coverage and Sensitivity

Table 7 is the stabilized operating statement. Against $2,547,490 of revenue, the largest costs are staff payroll, taxes and benefits at $611,375, rent and operating expense pass-through at $414,000, trainer pay at $200,891, the general excise tax and surcharge at $114,637 and electricity at $104,520. Total operating expenses and reserve are $2,034,035, leaving $513,455 of cash flow available for debt service, a 20.2 percent margin after the assumed 3.0 percent equipment replacement reserve and 23.2 percent before it.

Each Hawaii-specific line has a sourced rate behind an assumed quantity. Hawaii has no sales tax; its general excise tax is assessed on all business activities, at four percent for everything other than insurance commissions and wholesaling ^[34], and the City and County of Honolulu adds a 0.5 percent county surcharge effective through December 31, 2030 ^[35]; the surcharge is added only to activities taxed at the four percent rate ^[54], which dues are, so the model charges 4.5 percent of gross receipts, the sum of those two sourced rates. Electricity is the assumed 240,000 kilowatthours a year for an air-conditioned box, at the 43.55 cents per kilowatthour that EIA reports as the preliminary August 2026 average price to commercial customers in Hawaii ^[36]. Payroll is built from an assumed 10,900 front-desk and floor hours at an assumed $19.00 an hour, above the $16.00 Hawaii minimum wage in force from January 1, 2026 and the $18.00 due on January 1, 2028 ^[55], plus assumed manager and membership director salaries of $165,000, an assumed 45 group classes a week at an assumed $50 a class, and an assumed 25 percent burden for payroll taxes, insurance and benefits, a burden that must absorb the Prepaid Health Care Act's requirement that employers cover employees who work at least 20 hours per week ^[56] and pay at least 50 percent of the premium ^[57]. Insurance of an assumed $45,000 covers liability and the hazard cover 13 CFR 120.160(c) requires on all collateral for 7(a) loans greater than $500,000 ^[58].

Table 8 is the debt. A floating 7(a) loan takes its rate from prime or from the Optional Peg Rate ^[59]; the daily series for prime read 7.00 percent throughout the first week of November 2026, the 2nd to the 6th ^[32], and the example adds an assumed 2.75 points, inside the 3.0 point cap for 7(a) loans of more than $350,000 ^[33], for a 9.75 percent rate against a 10.00 percent maximum. Over a 10-year level amortization the $2,660,495 loan costs $417,496 a year, coverage is 1.23x, and cash flow after debt service is $95,959. Against the 1.15x program floor shown in the same table ^[3] the 1.23x passes; against the assumed 1.25x lender minimum it falls short, and the higher of the two, 1.25x, is the binding minimum.

Table 9 shows how little room there is. Revenue down 10 percent takes coverage to 0.79x; revenue down 20 percent to 0.35x; a 2-point rise in the variable rate to 1.13x, with debt service rising to $453,442; expenses up 10 percent to 0.81x; and retail rent instead of flex rent, at Colliers International's Oahu retail averages of $4.62 base rent and $1.74 pass-through ^[14], leaves a cash flow loss of $217,345 and coverage of negative 0.52x: the same club in the wrong kind of building does not even cover its operating costs.

Table 10 translates the margin into two operating numbers. Each member contributes $968 a year after the costs that follow revenue, fixed operating costs are $1,325,895 and debt service is $417,496, so the club covers its debt at 1.00x with 1,801 members and reaches the assumed 1.25x minimum with 1,909, against the assumed 1,900; the 1,801 is 94.8 percent of the stabilized base. At the 1.15x program floor ^[3] the break-even is 1,866 members, or $87.36 of average dues with the assumed 1,900 members, and both sit below the binding 1.25x figures. In dues terms, holding the assumed 1,900 members, $84.29 a month covers the debt and $89.41 reaches the assumed minimum, against the assumed $89.00.

Table 11 is the ramp funding check, and it fails. The year 1 shortfall after debt service is $484,889 and the year 2 shortfall is $97,657, a total of $582,546 against the assumed $450,000 reserve, leaving negative $132,546 for the sponsor to fund. The model's level payments begin at opening, so the build-out period 13 CFR 120.212(b) allows ^[60] would not by itself close a post-opening gap.

Decision. The study would report the 1.23x as a shortfall against the assumed 1.25x minimum and the ramp reserve as $132,546 short, and would recommend a larger reserve or demonstrated sponsor liquidity before the loan is sized.

What the SBA 7(a) Rule and Hawaii's Health Club Law Require, and How the Study Would Meet Them

The program rule most specific to this asset class is an eligibility rule. 13 CFR 120.110(i) makes private clubs and businesses which limit the number of memberships for reasons other than capacity ineligible for SBA business loans ^[61]. A 7(a) gym must sell memberships openly; it may cap them when the floor is full, but a selective membership takes it out of the program, so the study would state the policy in writing.

The size, guaranty and fee rules are met with room. The maximum loan amount for any one 7(a) loan is $5,000,000 ^[31], and the $2,660,495 loan is about half of it. Loans of more than $150,000 may receive a maximum guaranty of 75 percent ^[28], the share the example assumes on a loan sized at an assumed 75 percent of cost. The assumed guaranty fee on a loan above $700,000 stays within 3.5 percent of the guaranteed share, plus 0.25 percent of the part of that share above $1,000,000 ^{[45] [30]}; the example applies that ceiling, and because the fiscal 2026 rate SBA sets by notice was not fetched, the fee charged could be lower.

The term rule most constrains the case. Under 13 CFR 120.212 the term is the shortest appropriate one for the borrower's ability to repay, capped at ten years unless real estate or long-lived equipment (useful life over ten years) is financed ^[2]; the maximum term including extensions is 25 years ^[62]. The example takes the 10 years the regulation supports for a loan of leasehold improvements, equipment and working capital, and does not assert that a lender could carry part of the improvements on a longer maturity. The regulation does allow an additional reasonable period, not to exceed 12 months, when necessary to complete the installation of equipment or leasehold improvements ^[60].

The credit and condition rules are general. 13 CFR 120.150 requires that a loan be sound enough to make repayment reasonably certain ^[4], a standard the 1.23x base case, the negative first year and the $132,546 reserve gap would all have to meet, and SBA can also ask a borrower for appraisals, a survey, or a study of whether the project is feasible ^[63].

Hawaii's health club law adds a layer no federal rule imposes. HRS chapter 486N requires presale receipts to be escrowed and kept out of construction and operation ^[5], released only upon the club becoming fully operative ^[43]; requires every contract to promise a fully operative date no later than one year after signing ^[51]; caps contract terms at an aggregate 36 months per buyer ^[49]; bars automatic renewal ^[50]; limits the initial payment on a contract longer than a year to 20 percent of the price ^[48]; and gives the buyer a five business-day cancellation right ^[52]. The study would show the lender a compliant contract form and a presale plan that keeps escrowed funds off the sources and uses.

Decision. The study would document open membership under 13 CFR 120.110(i), take the 10-year term the regulation supports, and attach a compliant HRS 486N contract form and presale plan as exhibits.

Risks a Lender Would Underwrite

• A shrinking island. In the latest year net domestic migration took 6,682 people out of Honolulu County, more than natural increase and international migration together put back ^[10]. The input at risk is the assumed 1,900 members, which Table 10 shows has little to spare above the 1,801 break-even.
• Dues the market will not pay. The Health & Fitness Association's 2024 consumer report found that almost 67 percent of members paid less than $50 a month in 2023 against the assumed $89.00 here ^[23]; Table 10 shows $84.29 covering the debt.
• Churn. The Health & Fitness Association's benchmarking report puts retention at 66.4 percent ^[1], so Table 5 has the club replacing 638 members a year; marketing at an assumed 4.0 percent of revenue is the cost of that replacement, and lower retention raises it while lowering the member count.
• Electricity. EIA's preliminary August 2026 Hawaii commercial price of 43.55 cents per kilowatthour was up from 34.93 cents a year earlier and about three times the U.S. average of 14.47 cents ^[36]; another such year moves the expenses-up column in Table 9 (0.81x) toward reality.
• Wages. The Hawaii minimum wage rises to $18.00 on January 1, 2028 ^[55], one dollar under the assumed $19.00 floor wage.
• Construction cost and schedule. Rider Levett Bucknall's Honolulu index rose 6.49 percent in the year to July 2026 ^[39]; an overrun lands on the assumed $120 per square foot fit-out, and a delay collides with the HRS 486N-10(b) promise of a fully operative date within one year of each presale contract ^[51].
• The lease and the zoning. Colliers International put Oahu industrial vacancy at 0.93 percent at the end of 2024 ^[13], and Table 9 shows a retail lease taking coverage to negative 0.52x. The assumed $1.75 base rent is an asking rate, not a signed one, and whether a fitness facility is a permitted use in an industrial district was not sourced; both are site risks to resolve before any lease is signed.
• Presale cash in escrow. HRS 486N-10 keeps presale receipts out of construction and operation ^[5] until the club is fully operative ^[43], so early sign-ups cannot plug the $132,546 gap in Table 11.
• Rate and eligibility. The loan is variable off prime ^[59], and Table 9 shows a 2-point rise taking coverage to 1.13x; a membership policy that screens for reasons other than capacity makes the business ineligible under 13 CFR 120.110(i) ^[61].

Decision. The study would rank the member count and the dues level first, the ramp reserve second and the lease and zoning third, because the first two decide whether the loan pays and the reserve decides whether the club survives until it does.

What Would Decide the Outcome

This example is thin by design: 1.23x against an assumed 1.25x minimum in the stabilized year, a loss in year 1, 0.77x in year 2, and a ramp reserve $132,546 short. Four things would decide whether a study could recommend the loan.

The first is the member break-even. Table 10 shows the club covering its debt at 1.00x with 1,801 members and reaching the assumed 1.25x minimum with 1,909, against the assumed 1,900 at stabilization. A study that cannot show from a trade-area count and a competitor census why a club of 15,000 assumed square feet holds about 1,900 assumed members has not answered the question; the Health & Fitness Association's 26.1 percent national penetration ^[16] and Honolulu County's 988,703 residents ^[6] bound the island, not the club.

The second is the dues break-even. Table 10 shows $84.29 a month covering the debt at the assumed 1,900 members and $89.41 reaching the assumed minimum, against the assumed $89.00. The Health & Fitness Association's national average of $65 in 2023 ^[22] sits well below that band; Honolulu County's $102,382 median household income ^[11] is the reason to believe the band is reachable, and a competitor price survey is the only thing that would prove it.

The third is the ramp and who funds it. Table 11's $132,546 gap after the assumed $450,000 reserve is the number a lender would ask the sponsor to cover before closing, in cash on deposit or in a larger reserve inside the budget, since working capital is an eligible 7(a) use ^[44]. A larger reserve raises the loan and the debt service, so the cure is not free; the alternative is more equity than the assumed 25 percent, and Hawaii's escrow rule ^[5] removes the presale cash that would carry a mainland club through the same months.

The fourth is the lease. Flex space at the assumed $1.75 plus $0.55 gives Table 7's $414,000 of occupancy cost; retail space at Colliers International's Oahu averages of $4.62 plus $1.74 ^[14] gives Table 9's negative 0.52x. The study would want a signed letter of intent on a specific building, with the use confirmed under the zoning. Behind those four sits the rate, where a 2-point rise cuts coverage to 1.13x (Table 9).

Until that evidence exists, a sponsor's answer is to borrow less. At the binding minimum, the assumed 1.25x, the base case carries $2,617,593, rounded down to a restructured 7(a) loan of $2,610,000 (Table 12). On that loan the guaranty fee recomputes to $70,906, total project cost to $3,545,906 and borrower equity to $935,906, or 26.4 percent of cost and $49,075 more than the base case. Debt service drops to $409,572 and coverage rises to 1.25x, meeting the assumed 1.25x lender minimum and clearing the 1.15x program floor the site's own SBA page gives ^[3]: the restructure passes both tests, with $1,489 a year to spare. It does not cure the ramp: the two-year shortfall falls only to $566,698, leaving the assumed $450,000 reserve $116,698 short, for the sponsor to hold in cash.

Decision. A study could call the project financeable under 7(a) only with a demonstrated member base and dues level at or above the Table 10 break-evens, a sponsor who can fund the ramp gap, and a flex lease on a site where the use is permitted; without a competitor census for West Oahu it would not recommend the loan at the assumed size.

Questions to Ask a Feasibility Study Company About an SBA Gym Loan

Why is this a 7(a) loan rather than a 504 loan? Because there is no real estate and a large part of the budget is working capital and pre-opening cost, which 13 CFR 120.120(b) lets 7(a) proceeds fund ^[44]. The price of that flexibility is the term: 13 CFR 120.212 holds a loan that does not finance real estate or long-life equipment to ten years or less ^[2], which is what makes $417,496 of annual debt service out of a $2,660,495 loan (Table 8).

Is a gym eligible for an SBA loan? An open-membership gym is. 13 CFR 120.110(i) excludes private clubs and businesses which limit the number of memberships for reasons other than capacity ^[61]; a club that caps only when the floor is full is eligible, and a selective or invitation-only club is not.

Why does Hawaii change the analysis? HRS 486N-10 puts presale receipts in escrow until the club is fully operative ^[5], so the ramp has to be financed (Table 11). The general excise tax is a tax on the business ^[46], not a sales tax the member pays separately. And EIA puts Hawaii's commercial electricity price at about three times the U.S. average ^[36].

What does a gym feasibility consultant test that a generic consultant might not? Retention and the two break-evens. The Health & Fitness Association's benchmarking report puts retention at 66.4 percent ^[1], and Table 10's 1,801 members and $84.29 of dues at 1.00x are the two figures a lender can check against the operator's own software after opening.

How should a borrower choose a feasibility study company for an SBA gym loan? Ask whether the firm will state every project figure as an assumption with a basis, as Table 3 does; whether it will build the competitor table this example lacks; whether it knows HRS chapter 486N well enough to keep presale escrow off the sources and uses ^[5]; and whether it will write a 1.23x as a shortfall against the assumed 1.25x minimum rather than round it up.

Can the base case be made to work? Table 10 says what it would take: 1,909 members instead of the assumed 1,900, or $89.41 of average dues instead of the assumed $89.00. The ramp gap of $132,546 in Table 11 has to be funded before those small margins matter. The other route is the $2,610,000 loan in Table 12, bought with $49,075 more equity.

Decision. A borrower choosing a feasibility study company for this loan should choose the one that will write the thin case as thin, show the member and dues break-evens, and name the lease, the zoning and the escrow rule as conditions.