SBA 7(a) Fitness Center Feasibility Study in New Jersey

New Jersey gyms under 7(a): a franchise business with a heavy loss tail

Fitness centers rank 4 of 39 among New Jersey's asset classes, and the state is 6 among states for fitness center loans under 7(a), with 443 approvals in FY2017 to FY2026 worth $211.4 million. The cell is defined less by size than by franchising and losses. The median loan of $250,000 is 1.02x the nationwide 7(a) benchmark, almost exactly in line, and $75,000 to $627,700 marks the middle half. Franchised units account for 52.8% of loans, a majority, which makes brand agreements part of the typical file.

The lender table

TD Bank, National Association is first with 71 loans totalling $12.4 million. The Huntington National Bank comes next with 53 loans and $15.1 million, with Manufacturers and Traders Trust Company third at 42 loans and $6.1 million, followed by Unity Bank at 14 loans and $16.3 million, and Stearns Bank National Association at 14 and $3.0 million. The contrast between Unity's few loans and large dollars and TD's many small ones is worth noticing. SBA names whoever holds or held the paper; the table is silent on any bank's criteria. Bergen County has 67 loans, Monmouth 53, Middlesex 44, Morris 39, Somerset 35, Ocean 34, Essex 31, Hudson 28, Camden 20 and Union 19.

Losses run high

The charge-off figures stand out. Among 177 loans that funded in FY2017 through FY2021, at least 11.9% are already charged off, while 8.5% were gone inside five years. Since loans still open can fail later, the true rate can only be greater. Cancellations are closer to the norm, at a floor of 14.6% of approvals through FY2024 and a ceiling of 15.9%.

The file a New Jersey gym needs

A lender will look hard at member retention. A study should therefore test the monthly membership base needed to cover rent, staffing and equipment lease payments, along with the join and cancellation pattern that a franchise or independent concept can realistically expect. Population and income within a short drive, competing clubs and low-cost chains need mapping, and fit-out cost needs to be set against a ticket near $250,000. Run coverage with members below plan, because fixed cost leaves little room. Since most gym assets are equipment and leasehold work, an appraisal concentrates on business value.