Most clubs will be eligible to borrow based on their underlying assets: real estate or leasehold improvements, furniture/fixtures/equipment and the business value.

For large fitnesscompanies, debt may then be based on historical cash flow with certain adjustments for non-recurring expenses, maintenance capital expenditures, etc. A typical fitness facilitywould not be eligible for such borrowings until it reached a substantial size, and would generally exclude the appraised value of the real estate.

The cash flow borrowing sector has had its difficulties in the recent 12 to18 months, as banks are offering much less leverage, creating stricter covenants and discriminating toward larger accounts. The smaller club groups have, however,found success during this same period.

In a survey of more than 200 fitness facilities,1 most club groups found satisfactory results borrowing from local commercial banks, but more were gravitating for the first time to regional/national banks.

Some of the major banking institutions lending to the club industry are listed in Table 1.