Something in the world of floating have you stumped?
Show Highlights
For lots of float center owners, this is their first venture into starting a small business and it can be more than a little daunting. Fortunately, Graham and Ashkahn are available to break down specifically what the Small Business Administration does and how it operates to help those just getting their toes in the salty industry waters.
Show Resources
Listen to Just the Audio
Transcription of this episode… (in case you prefer reading)
Graham: Alright. So, today’s question is, “What is an SBA loan? Why do I keep hearing it recommended for a float center, and how is it different than a standard business loan?”
Ashkahn: Okay. I guess we just start by saying what the SBA is.
Graham: Yeah, so the SBA is the Small Business Administration and they pretty much exist to help out small businesses as a government organization.
Ashkahn: And before we get into loans, they do other stuff, too, right? Like you can go to the SBA for information, and consulting, and stuff like that, right?
Graham: Yeah absolutely, they provide a whole host of resources. And, their loans, too, are geared for small businesses, since they are the Small Business Administration, but even within that, there’s a huge variety of loans that they offer — micro loans, loans for equipment, loans for real estate, general small business loans — so there’s a whole variety, both in services, and just within loans, of loan services.
Ashkahn: That they loan, themselves?
Graham: Wait, can you phrase that differently?
Ashkahn: That the SBA actually loans? I mean, we’re talking about SBA-backed-loans, from a bank?
Graham: Yep, and so that’s what these are, too. I think some of their micro loans, they might actually fund themselves.
Ashkahn: They might fund themselves.
Graham: Yeah, yeah.
Ashkahn: Okay, but the rest of it is what we’re going to be talking about, an SBA-backed loan?
Graham: Yeah. And so, and I should also say that we’re not bankers, so we’ve stumbled through this process, and we know a fair amount from both talking to people who have gone the route of getting SBA loans, and talking to advisers in the SBA, and stuff like that. Float On hasn’t actually received any loans, or financing, ever, so, whenever we talk about financing it’s a little bit outside of our exact personal experience, so just take that with a grain of Epsom salt, I guess, as we’re going through this.
So, the SBA-backed loans is basically a lending institution, often a bank or something like that, will be actually giving out the value of the loan, and what the SBA is doing, is guaranteeing the amount of that loan to the bank. So it’s kind of like an intermediary default level, right? Like if you get a loan, and things fall apart, and you don’t end up paying back the loan, rather than the bank or whoever’s doing the lending, not getting that money back, really, who’s not getting that money is the SBA. They’re kind of coming in, and being like, “Okay, we guaranteed this loan up to a certain amount, so we’ll pay the bank the money that you were unable to pay them,” and that makes lending institutions way, way more likely to lend to small businesses.
Ashkahn: Right, it just takes out the kind of riskiness that comes with funding something that doesn’t exist yet, and I think that’s the basic reason why a lot of people go with SBA loans — it’s just really difficult to get a non-SBA backed loan from a bank if you’re starting a small business.
Graham: Almost impossible, these days.
Ashkahn: Yeah, it really seems like banks, by default, they’re looking for like three years of finances, and tax returns, and stuff like that, and you’re like, “Oh no! This doesn’t exist yet. I don’t have three years of financials to show you.”
Graham: Yeah, and if you go the route of trying to talk to a lender, trying to get a non-SBA-backed loan, you’ll just hear some preposterous terms back, almost certainly. Things like, you need 80% down on the loan, or that the interest payment is ridiculous, or they want the entire thing paid back within two years, or something really high, because you’re in this really high-risk category.
Ashkahn: Right.
Graham: And, because you’re high-risk and you don’t have anyone backing you, they’re like, “Okay, well yeah sure, if you have 80% of the loan payment, itself, then, yeah, we’ll give you the other 20%,” or something, again, a little more extreme like that.
Ashkahn: That’s why you hear about this from float centers or other businesses starting up — it’s just by far the most common way someone’s actually managing to secure a loan. It’s very difficult to do without SBA backing.
Graham: Exactly, and if you are thinking about going the SBA route, a few things to know — the SBA has a bunch of institutions that are able to apply for SBA loans. Almost any lending institution that you go to. You can also try to go through the SBA to get that loan. But there are some pre-approved lenders, as well, who, if they decide to get out a loan, they don’t even need to go back to the SBA to get approval from them on the granting loan. So, they’re pre-approved, in the sense that, if they grant you a loan, that loan can automatically be an SBA-backed loan. And you’ll see this for a lot of banks, like Bank of America, Wells Fargo, Chase, things like that, have historically been SBA pre-approved lenders, which makes sense. They have an extreme loan process themselves and the SBA looks at them, and they’re like, “Okay, well, that’s about what we do to vet, so, like, you’re good.”
So, you can get that list of pre-approved lenders from the SBA, and they’re a great resource to go to to find out more information about how to increase your chances of actually succeeding in getting an SBA-backed loan, and who to approach, and things like that. They’ll also help you through the process. If you contact your SBA, in addition to actually backing these loans, you can talk to advisers who will take a look at your business plan, let you know if they think you should change anything, if they think anything’s missing and the loan process is going to be harder, things like that. Definitely take advantage of more than just their money. They make the entire road a little easier, too.
The last thing I wanted to say, was the type of loan, too, can have an impact. One nice thing about getting a loan with a float tank center, is we do have these big expensive pieces of equipment that tend to maintain their value over time. Having an equipment-based loan, especially if you’re going in with a certain amount of the money, and all you need is an amount of cash equal to or less than the amount that your float tanks are costing, getting an SBA-backed equipment loan, specifically, is really nice. It’s just another one of those things that lenders like having to fall back on.
If you’re unable to pay the loan, then, they can always seize your equipment, and sell it off, and the fact that float tanks keep a lot of their value on the used float tank market is also a really good argument, in that case, for getting an equipment loan. So, again, if you’re already going in with a healthy amount of the money for your own buildout and stuff like that, that’s a really good option to look at, as well.
Alright, thanks for tuning in everyone, and, as always, toss your own questions up at floattanksolutions.com/podcast, and we will answer them later.
Recent Podcast Episodes
How do you Start Opening a Float Center? – DSP 285
For people just starting out, it can seem really daunting to start a float center. They may not even know where to begin.
Graham and Ashkahn tackle this idea head on. The most important thing is to do a lot of research (definitely check the resources) and to make sure you have people that you can call and refer to for support when you need it.
What to do When Floaters Interrupt Intros? – DSP 284
Ashkahn’s back and on form. He and Graham take on the question of how to handle first time floaters interrupt the pre-float intros explaining the process.
There’s a lot of information that first time floaters need, and if they aren’t paying attention, it can cause messy floats or unnecessary difficulty or confusion. The reunited duo provides some great tips while going over different customer scenarios.
When is the Best Time to Open a Float Center? – DSP 283
Graham takes the helm again without any co-captain to steer the SS Daily Solutions through the rugged storms of float industry questions.
Today he answers a question about when the best time of year to open your float center. The important thing to remember is that, whenever you choose, you should plan for even earlier, as float centers are more likely to get delayed in construction.
Tips for Choosing Contractors – DSP 282
Graham the Lone Podcaster takes the reigns on answering how to pick a contractor for float center build out.
It’s the kind of big decision that every float center owner hopes to only make once, so getting as much information ahead of time is extremely useful. Graham breaks down some useful tips and explains how to ask for a bid, specific skill sets to look for, and general advice on knowing when to walk away.
Starting your Pumps Early – DSP 281
In this episode, Graham goes solo again to answer a particularly loquacious listener who sent in a question about how to logistically handle your changeover when a floater comes out early.
It can be tempting to start your changeover as soon as possible, especially if you have a few of them to get to, but Graham lays out some helpful things to remember before flipping that switch and running your pumps before the allotted time.
Latest Blog Posts
4,937 Things to Know About Buying a Used Float Tank
You’re thinking about buying a used float tank. Whether this is for a new center, an addition to an existing operation, or a purchase for your home, this is a big decision.
We’ve compiled together some of the major questions and considerations to entertain before making a purchase. While you do have the opportunity to save some money and snag a good deal, there can be hidden costs and unknowns to weigh against those savings.
Offering Overnight Floats
Almost three years ago, we discussed the merits of running overnight floats from an employee’s perspective, focusing on the opportunities of this unique experience as well as its challenges. We’d like to take a deeper dive into this issue because, while the majority of floaters come through our tanks during “normal” business hours, overnight floats form an important part of not only Float On’s identity, but also its business structure and broader culture.
How to Talk About Floating
You step into the elevator and shuffle to the side to make room for the kind-eyed, old woman with the miniature poodle.
“Good morning,” you say with a smile.
“Good morning,” she beams back, her gaze resting briefly on your water bottle with the logo from your float center’s annual party.
After a brief pause, she asks, “What is Float-a-Palooza?”
You take a breath, smile, and launch into your literal elevator pitch.
So, what do you say?
Employee Handbook Template
Whether you are a small or large float center, you most likely have other employees working for you. Regardless of the size of your staff, for reasons of efficiency and legality, it’s essential that your organization has clear and straightforward policies and guidelines. No matter how good employee communication is, it’s always safest and cleanest to have clear parameters and expectations written down.
This is why Float Tank Solutions has created a customizable Employee Handbook Template. Free for anyone to download, it contains federally compliant language (current as of October 2016) and contains a multitude of sections, from employee benefits and compensation descriptions to job guidelines and discrimination policies.
