Precor is delighted to welcome a guest post from Asset Advantage, an established privately owned finance company which specialises in lending to SMEs throughout the UK. Over the past ten years they have lent over £250M to a huge variety of business sectors and for a wide range of purposes. However one key area in which they have carved out a highly respected niche is that of lending to new starts in the fitness sector. Asset Advantage have financed equipment for over 400 independent and franchise gyms and in the process have built up a deep knowledge of how to assess lending proposals and structure finance packages. In this article Philip Knight, Credit & Risk Director gives some insights into the key elements Asset Advantage, and other lenders, look for in a borrowing proposition.

At Asset Advantage we take a slightly different approach to traditional asset based finance in that we are much more interested in the business proposition than we are in the resale value of the equipment. That’s not to say that we don’t consider the equipment. The quality of the equipment being acquired says a lot about the aspirations of the business. We know that gym goers are attracted to sites that operate quality equipment like Precor and that buying a brand like this in the long term reduces costs on repairs and maintenance.

The process of applying for finance invariably involves the preparation of a business plan document which will be reviewed by the credit team at the finance company. My six areas to focus on in your proposal are as follows:

1. Highlight your experience of a) running a business and b) where that experience is related to operating a customer facing business like a gym. It’s not necessarily a deal breaker, but lenders are naturally more predisposed to individuals that can demonstrate that they are aware of the numerous skills needed to run a business and for the record, being a member of a gym doesn’t count!
2. Demonstrate that you know the local area and have researched your client base. Avoid generic commentary about the gym industry: most borrowers, including Asset Advantage, have seen that stuff a thousand times already.
3. Spend a lot of time working on your cash flow and equally critically, the assumptions you have put into them. Lenders need to be convinced that you have done your sums and that your assumptions are realistic. For your own peace of mind prepare some downside scenarios to give you some wriggle room if, for example, pre-sales don’t take off quite as you expect.
4. Make sure that your proposition is as comprehensive as you can possibly make it. This is one of those occasions where less is most definitely not more. Lenders are used to digesting large quantities of information and prefer to get it up front. If you are using a broker I suggest you discuss with them what information they need and don’t assume that just because you told them something that it has been communicated to the lender.
5. Work on the details of your marketing plan. For example, lenders know that successful pre-sales can be critical so they will like to see that you are investing time and energy in it.
6. Don’t withhold any information. It might be tempting to not mention that you had a default on a credit card a couple of years ago, but rest assured the finance company will find out about it from the Credit Reference Agency. If you haven’t told them then they will wonder what else you might have ‘forgotten’ to mention. Be upfront, explain the background and demonstrate why it is part of your history and not the future.

At Asset Advantage we quite often like to come out and meet with our customers. So if a meeting is lined up, then prepare well for it. Consider putting together a short presentation and most importantly show how committed to the business you are. It’s difficult to say no to enthusiasm!

Finally it’s worth saying that lenders are in the business of lending money. Spending time assessing proposals is a time and resource consuming activity so funders genuinely want to approve your proposal. Help them do their job!

Find out more about the financing options available with Precor