SBA 7(a) Fitness Center Feasibility Study in North Carolina

Heavy loans, heavy franchising, heavy losses

North Carolina's fitness center record under SBA 7(a) is distinguished by size, with a median loan of $341,000 that is 1.39x the national median for the class. The program approved 366 loans from FY2017 to FY2026 worth $187.7 million in gross dollars, and half of the loans fall between $137,250 and $624,500. North Carolina is ninth among states by count, and inside it fitness centers take fourth place on the list of 39 classes. Franchise flags are on 58.2% of the loans.

The loss floors

A cohort of 138 loans funded by FY2021 has 9.4% charged off to date and 7.2% charged off inside five years from approval. Open loans can still raise both floors, and both are high. Cancellations reached at least 11.3% of FY2017 to FY2024 approvals, or 12.4% when loans never disbursed are treated as cancelled. For a lender the class is not a low-loss one, and for a borrower the lesson is that fitness lending is sensitive to membership and to the franchise relationship.

Who holds the loans, and where

The Huntington National Bank holds 57 loans worth $18.5 million. Wells Fargo Bank National Association holds 23 worth $6.4 million, TowneBank 20 worth $12.6 million, United Community Bank 16 worth $14.7 million and Pinnacle Bank 14 worth $10.4 million. SBA shows the bank that holds or held each loan, and nothing more. Wake County has 92 loans and Mecklenburg 86, far ahead of Durham and Guilford with 17 each. Approvals fell to 22 in FY2019 and reached 55 in FY2026, the highest of the period.

Testing a North Carolina gym

Because the guarantee is broad, the study has to say what the money buys, whether a build-out, equipment, a franchise or an existing club. The central test is membership. How many residents and workers live within a short drive, which clubs and boutique studios compete, and how quickly do members leave? Weigh dues and class income against rent and wages, assuming sign-ups accumulate slowly. The franchise agreement deserves its own review for fees and required equipment replacement. Given the loss floors, the study should show payment coverage under a membership shortfall, and the appraisal will rest on what the club earns, not on the machines inside it.