Have you ever worried about the newer, bigger club down the street stealing your members? Do you worry about how you’re going to keep up with the big box clubs? What about how you’re going to pay to replace your worn-out equipment? We all know that member retention is top-of-mind when it comes to gym ownership. The truth is, your members love you. They picked you for a reason. If they wanted a chain facility, they’d have jumped on that bandwagon long ago. So how can you keep them happy? How can you keep them coming back to what they loved so much about you in the first place?
We all know that next to membership fees, one of the number one reasons people stop going to gyms or start going to a different gym is the equipment. If it’s something they can do at home or something they can do somewhere else better, why walk in your doors? Keeping your equipment up-to-date not only shows that you care about your business, it shows that you know about fitness and are paying attention to the market. Whether you’re upgrading your current equipment or adding new equipment, having the cash flow to pull the trigger can be a struggle for new or small gyms who don’t have the financial backing of a big box chain.
That’s where equipment financing comes in. Lots of club owners either haven’t heard about or aren’t familiar with this option. That being the case, they put off buying the equipment they need. The thought of finding financing seems too daunting or they wind up using a credit card or personal bank loan. What many don’t know is that equipment leasing is a fast, easy process and has great tax benefits!
When using either a bank loan or credit card, you’ll likely be required to put the debt in your name, not your club’s name – meaning this debt will show on your personal credit report, holding you personally liable for restitution. Equipment leases are done in the business name, not affecting your personal credit. As an added bonus, leasing your equipment keeps your bank lines and/or credit cards available for “cash” needs.
Equipment leases generally have low or no deposits, give you up to a 5-year repayment term and you have the option to own the equipment at the end of the term for either $1 or fair market value (FMV – 10% of the original invoice amount). Other options often include 90-day deferred programs, seasonal payment plans and other creative financial solutions to help fit your unique needs and keep your cash flow steady. The best part is you get your equipment when you need it with no waiting periods.
Committing to any monthly payment can be scary, whether it’s for equipment, a location lease agreement or even your upgraded internet plan. No one enjoys spending money. But as with anything, you have to weigh out your options (pun intended). Ask yourself, “what do I have to gain and what do I have to lose?” Yes, financing new equipment for ~$400/month isn’t on the top of everyone’s list, but losing members and not being able to sign-up new ones because of your worn or outdated equipment is going to cost so much more in the long run.
Consider this analogy; you should look at your equipment the same way you would an employee. Both have a job to do. They are there to help your members stay fit, to help you generate more business and to boost your profits. You’d never consider paying an employee three or four years’ worth of salary in advance, would you? So why would you pay for equipment ahead of time? By leasing your equipment, it’ll easily generate enough profits to cover its payment as well as put some money in your pockets over its lifetime.
Some other lesser known benefits of equipment leasing are the tax benefits. Equipment leases are structured as “rental” agreements, which generally allows you to write-off the “rental payment” against your income, for tax purposes. This could result in huge tax savings for you each quarter, making the equipment purchase worth substantially more than you had expected. You also have the option to write-off the entire invoice amount of your equipment using Section 179 tax benefits. Speak with your tax professional about the best option for your club.
If you’re considering purchasing equipment, now is the time to do it. Interest rates are rising. Just a 1% hike in interest rates could make the difference between a payment you can afford and having to cut back on what you want to purchase. The key is finding a leasing company you can trust that doesn’t just specialize in equipment, but that specializes in fitness as well. As an experienced trainer and/or club owner, you’ll know within minutes if the person on the other end of the phone knows the difference between an elliptical and a treadmill. Choosing the right leasing company can help you grow your business and keep your members as happy as they were the day they joined your club.