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 Often Does Float On Party? – DSP 225
Ashkahn and Graham have developed a bit of a reputation over the years within the industry as party animals. Anyone who has met them can confirm this to be true. But how often to the throw parties at Float On? What are good occasions for float center parties and how do you throw one?
The guys share their party philosophy and offer some nice tips and tricks for throwing a sensory deprivation shindig.
Is there a “Best” Float Position? – DSP 224
Ashkahn and Graham thoroughly debunk the myth of a “best” float position. The Float On boys explicate their philosophy that there is no right way to float and instead talk about all the different positions they enjoy floating in. They learn more about each other than they expected to in the process.
What to Look for When Hiring a Float Center Employee – DSP 223
What makes a good float center employee? What does Float On look for when trying to find someone to take care of their salt monster tanks and their blissed out customers at the same time?
Ashkahn and Graham break down the qualities they look for when hiring, and what makes the people at Float On so special.
How Do you Incentivize Return Floaters without Memberships or Packages? – DSP 222
How many times has a float center owner had a first time floater come out of the tank and said something along the lines of “that was amazing! I need to do this every week!” and then they never see that person again? How do you get them to come back without committing to a membership or a high ticket package of floats?
Ashkahn and Graham share their thoughts on this exact problems and some of the creative solutions they’ve implemented at Float On to combat it. The key, for them, has been keeping it simple and making it accessible.
How to Schedule Your Float Center During the Slow Season – DSP 221
For most float centers, the summer months drastically change how busy it gets. It seems that zenning out to nothingness is moderately less appealing when there’s a lot of outdoor activities to enjoy.
Graham and Ashkahn share their thoughts on a reduced schedule. Float On runs 24 hours almost every day throughout the year. so reducing their schedule is typically against their philosophies. They explain some of the reasons people might consider it, what are some good ways to go about it, as well as explain some practices to consider avoiding when cutting hours.
Latest Blog Posts
Float Quarterly – January 2016
It’s been our pleasure to be actively involved in the float industry for over five years now. In 2016, we’re already on track to have more new centers opening, more press covering floating, and more resources for people just entering our salty world than ever before.
With so much action, we’ve decided to send out brief, quarterly updates on our industry to keep people posted on the all the latest happenings. Welcome to our first installment!
Training to Become a Certified Pool/Spa Operator
Each year at the Float Conference, we put on a Certified Pool/Spa Operator (CPO) training course. At first, that might strike you as an odd thing to have as part of a float tank conference. This post will explain what CPO training is and why we think it can be a really useful certification to have on your belt.
Increase Sales by Offering Retail in Your Float Center
On their own, float tanks have a limit to their profits. Retailing has the potential to bring extra money into your shop, but it also requires a lot of work and attention on your part to really be successful at it. At Float On, our retail contributes 6.5% towards our overall sales and 3% of total profit. While this might not seem like a large contribution, depending on your sales, it could end up paying the wages of a whole extra employee.
The Health Department and Float Tanks… How to get Approved!
If you’re working on starting a float center, chances are you’re nervously anticipating having to call the health department. We’ve all heard horror stories of people being asked to follow pool rules that don’t make sense for them, or having to do costly changes to their pump systems.
float tanks not regulatedBelow is our best advice for working with your health department to get your float center approved, but before we dive into that, it’s important to get a bit of an understanding as to how the health department works.
