There are four main types of business-oriented finance products to help your gym gain the equipment it needs. These are equipment rentals, chattel mortgages, asset leases, and a rent to own option.
Equipment rental is equivalent to a hire purchase agreement in which a lender purchases the equipment on your behalf and charges a rent for their use over a set term. Equipment rentals are useful as they feature fixed interest rates and terms ranging from 12 to 60 months. Rental costs are also fixed by month. This is ideal for gyms that need the latest equipment. At the end of the term you can hand the gear back to the lender or purchase the equipment, based on the residual value remaining.
Chattel mortgages work in the same way as consumer loans. A lender gives you money to purchase the gym equipment outright. You then pay off the loan until the balance reaches zero and the mortgage is removed. These types of loans are secured against the property, which means a lender will pass on savings in more competitive interest rates due to taking on lower risk.
An asset lease, much like equipment rental, also sees the lender buy the equipment and leases it to your business. You can structure payments according to cash flow projections and add a residual value (balloon) to the lease to reduce repayments. At the end of the lease, you can start a new lease, sell the equipment, and pay off the lease, return the equipment, or purchase the equipment by paying off the residual.
Rent to own or rent to buy gives a gym the opportunity to try before purchasing. There’s no lock-in contract, and your business pays a fixed rent at a fixed interest rate. The advantage here is that you can purchase the equipment at the end of the rental period. If your gym isn’t producing the cash flow you’d hoped for, you can return the equipment for no additional cost.