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 Float Centers Incorporate Massage? – DSP 210
What’s the best policy for a float center that wants to add massage? Do they hire on the Licensed Massage Therapist (LMT) as an employee, or do they bring them on as an independent contractor? Or what about just letting them rent a room in their business and not having to worry about it.
Dylan Calm of The Art of the Float podcast is in the studio with Ashkahn and Graham to discuss this issue, since his float center, The Float Shoppe, offers massage as well as other services, unlike Float On.
Can You Wear Jewelry in a Float Tank? – DSP 209
Sometimes people wear jewelry. Sometimes people float. What happens when these things overlap? What about piercings?
Graham and Ashkahn concisely explain why it’s a good idea to take that wedding ring off before you float in this episode.
What’re the Benefits of Financial Transparency for a Float Center? – DSP 208
There’s a traditional wisdom in business that dictates certain information should be held close to the vest. Financial information, hiring information, performance metrics, and so on should only be shared on a need to know basis. More recently, there’s been a push for more businesses to have transparency in some of these areas.
Ashkahn and Graham explain their stance on transparency and the thought process behind making Float On as transparent as possible, as well as many of the benefits they see on a regular basis because of it.
How to Prevent Losing Members to Cheap Discounts – DSP 207
Many float centers rely on memberships, usually monthly, to help maintain a steady flow of income throughout the year. Sometimes that’s not enough, like during slow months, and a steep discount can seem really attractive for filling up float tanks. What’s the best solution to making sure that you aren’t cannibalizing your own sales with discounts and potentially losing members?
Graham and Ashkahn share their tried and true approach to this nuanced question and share some excellent examples of how Float On rewards its members without losing sales during discounts as well as throughout the rest of the year.
Dealing with Low Flow After Installing a Flow Meter – DSP 206
Flow meters are designed to measure how quickly water travels through a filtration system. This is useful for all sorts of recreational water facilities. Pools and spas have been using them for years. Often times health departments will require them for float tanks, as they help provide a certain level of assurance to the filtration quality of a system.
The problem arises when using flow meters that aren’t designed to handle the specific gravity of float tank solution. So far, only one flow meter is designed to be accurate for float tanks and if a system isn’t using that one, it can be a bit surprising to find out that the flow is different. Ashkahn and Graham talk all about the reason for flow meters and how to troubleshoot problems that may cause a loss of flow.
Latest Blog Posts
Handling Tough Decisions…
I’ve written the introduction to the conference program for four years in a row, and each year I like to share it on this blog. For those of you who didn’t make it out for the 2015 Float Conference, here are a few of my thoughts on the work that float center owners do, and the questions they may face in running a float tank center.
How to Drain and Fill a Float Tank
There are roughly 850 pounds of epsom salt and 200 gallons of waters in an average sized float tank (approximately 8 feet long and 4 feet wide). It takes hard work (and a few tips I’m about to share) to get a tank ready for floating.
The Whys and Hows of Email Marketing
A trending strategy when a small business goes to market is that social media marketing becomes their main focal point. On the surface, social media marketing is easy to get started with, the costs can be nil, and most people are already using it for personal use. The...
How to Deal with a Power Outage in your Float Center
Power Outages = Unplanned Sensory Deprivation It only took a day since the publishing of my last blog post before I would have to put my knowledge of unconventional ways of waking up floaters to the test. The incident did not involve “sinkers” those individuals who...
