Deciding how you want to finance your fitness business is essential to getting on the right track. Three of the most common financing options are Bootstrapping, Debt, and Equity.
Bootstrapping is using your own money to finance your fitness business and reinvest any money you make back into the business. So what does this mean for you?
- The business is 100% yours and completely under your control.
- You have to make every decision.
- Your business will experience slower growth, because you don’t have as much money.
- You’re using your own money, which means you’re limited in terms of how much you can finance to start with.
Debt Financing is when you take a loan from the bank, SBA, etc. You’re still the sole owner of the business, but you will have to pay interest on the money borrowed over time which can be expensive. Not all fitness businesses can take out loans as many banks make you provide proof of income. However, there are other places like the Small Business Administration that will loan money to newer businesses. A couple of things you should keep in mind when using debt financing.
- Interest rate on the loan
- Collateral on the loan
- Terms of the loan
- Make sure it’s a reputable bank or financial institution
The third most common form is debt is Equity.
Equity is when you have outside investors, angel investors, or venture capital firms give money and buy a portion of your fitness business. The main advantage here is there isn’t an obligation to repay the money acquired. Think SharkTank – Someone is investing an amount of money into your business in return for owning a percentage of your business.
Here’s what Equity financing looks like:
- Allow your fitness business to grow quickly.
- You no longer own the entirety of your business.
- You will have to give up positions of power.
- The expectations can be very high, too.
- It’s mostly for people who want to grow fast and grow big.
- It often comes with a lot of pressure and stress.
Make sure you consult with your CPA, accountant, mentors, banker, to help advise you on the best type of debt for your fitness business.