SBA 7(a) Fitness Center Feasibility Study in Iowa

Iowa gyms and the cost of failure

The Iowa fitness center record under SBA 7(a) matters mostly for what happened to the loans. For the 36 loans that disbursed early, charge-offs so far are floored at 13.9%, whereas the figure over five years from approval is 2.8%. That charge-off floor is among the sharpest on these pages and is the figure a lender or sponsor needs to carry into any discussion. The class is a modest one in scale: 110 loans from FY2017 to FY2026, worth $33.5 million, a median of $155,000, and a middle half from $65,625 to $350,000.

Scale, brands and ranks

Against the national class, Iowa's median is 0.63x, so loans here are lighter than typical gym financings. Franchises account for 52.7% of loans, more than half, which is a feature of a market where national boutique formats compete with local studios. Fitness center is third of 39 classes inside Iowa, though the state is only 27th among states by count. Cancellation after approval is floored at 8.9%, with an identical ceiling.

Holders and counties

Polk County alone has 39 loans, far ahead of Scott with 10, Johnson with 9, Cerro Gordo and Linn with 7, Story with 6, and Dallas and Dubuque with 5. Wapello and Warren each have 3. The Huntington National Bank holds 16 loans and $4.2 million; With 8 loans each, Lincoln Savings Bank carries $2.7 million, more than double the $1.2 million at U.S. Bank, National Association. Six loans apiece sit with Bankers Trust Company ($865,500) and Clear Lake Bank & Trust Company ($583,000). These are SBA's present-holder records. Approvals grew from 3 loans and $687,000 in FY2017 to 8 and $5.4 million in FY2021 and 16 and $5.2 million in FY2026.

What the study has to test

Membership businesses fail on retention, so the study for an Iowa gym has to model it. That means estimating members drawn from the surrounding population, what rival clubs and studios charge, and the monthly attrition the business can bear while still meeting debt service. The build-out of floor, equipment and locker space should be tested against a ticket near $155,000. A lender looking at the charge-off floor above will want a downside case with slower enrollment and a cushion for the months before the club reaches maturity. Because more than half the loans are franchised, the study should say whether the proposal is a brand or an independent, since fees and required build-outs differ. The appraisal values equipment and the operating business, not just the premises.