Fitness Center Feasibility Study in South Dakota

A larger ticket in a small market

South Dakota fitness centers borrow more than their national peers. A median loan of $315,000 is 1.21x what South Dakota's national peers borrow at the median, with the central loans spread from $138,800 to $641,500. Fitness ranks 7 of 39 among South Dakota asset types, though the state ranks only 46 of 54 on volume, and the 0.85x location quotient is somewhat under the national weight. The file holds 37 approvals totaling $20.5 million across FY2017 to FY2026. Franchise use is 21.6%, lower than in some neighboring states. Cancellation and charge-off rates are withheld, so the median is the figure to read.

How the lending is structured

Of the loans, 28 are 7(a) and 9 are 504, an unusually high real estate share for fitness, suggesting that many South Dakota gyms own their buildings. First Bank & Trust is the one lender named, with 5 loans and $5.7 million, a large average. Minnehaha County, which includes Sioux Falls, holds 12 loans, Pennington County 9 and Lincoln County 7, with Brookings, Brown and Lawrence counties at 2 each. Yearly volume went from a single loan in FY2017 and FY2022 to 8 in FY2018, and FY2026 added 5 loans totaling $4.4 million.

With cohorts under 30 loans, South Dakota gyms get no published cancellation or charge-off percentage. Absent figures do not mean absent problems, and lenders should consult the class nationally.

What the study should test

A South Dakota gym study should show where the members come from, because the market is dominated by Sioux Falls and Rapid City and by small towns with few alternatives. The count of nearby clubs, the price point and the member build-up should be stated by site. If the project owns its building, as the 504 share suggests many do, the study must separate real estate from business value and test both against a typical loan near $315,000. A franchised concept must compare disclosed unit sales with local incomes. Coverage of the payment should survive slow joins and normal churn, and an appraiser will treat a gym building as special-purpose, so the study should name alternative uses.