Build Business Credit: Your Guide to Assisted Living Investing
Dec 27, 2024
Building strong business credit is one of the most important steps to financial success in the assisted living industry. A solid credit profile makes it easier to secure loans, attract investors, and handle unexpected expenses. Plus, it protects your personal credit from business risks.
In this blog, we’ll walk you through the simple steps to build and grow your business credit. These strategies will help you create a strong financial foundation for your assisted living facility, setting you up for long-term success.
Check out the video, too:
Why Business Credit Matters
Operating an assisted living business involves ongoing costs—like staff wages, maintenance, and equipment. Having access to business credit gives you flexibility to manage these expenses and respond to unexpected challenges, like emergency repairs or facility upgrades.
Business credit also helps separate your personal and professional finances. This separation is key to protecting your personal credit score and ensuring your business stands on its own. With strong business credit, you’ll have more options to grow your business and improve the care you provide to residents.
Step 1: Create an LLC or Incorporate Your Business
The first step in building business credit is making your assisted living business official. You’ll want to:
- Form an LLC or Corporation: This creates a legal entity separate from you as an individual. It’s also necessary for building business credit.
- Get an EIN (Employer Identification Number): Think of this as your business’s version of a Social Security number. It’s required for opening business accounts and filing taxes.
Pro Tip: Keeping personal and business finances separate helps protect your assets and makes tax season much easier.
Step 2: Open a Business Bank Account
Once your business is set up, open a dedicated business bank account.
- Why It’s Important: A business account helps track your income and expenses. Plus, it shows lenders you’re running a legitimate operation.
- Build Relationships: Establishing a good relationship with your bank can be helpful when applying for loans or lines of credit later.
This account will become the financial hub of your assisted living business.
Step 3: Apply for a Business Credit Card
A business credit card is a powerful tool for building credit.
- What to Look For: Choose a card with low interest rates, rewards for business spending (like cash back on groceries), and perks that fit your needs.
- How to Use It: Use the card for regular expenses and pay off the balance on time every month. Keep your credit usage below 30% of your limit to maintain a strong score.
This builds a history of responsible borrowing, which is key for your credit profile.
Step 4: Establish Trade Lines with Vendors
If your assisted living facility works with vendors for things like groceries or supplies, set up trade lines.
- Why It Helps: Many vendors report payment history to business credit bureaus. Paying your invoices on time can boost your credit score.
- How to Start: Ask your regular suppliers if they report payments to credit agencies. If they don’t, consider switching to vendors that do.
Building good payment relationships with vendors is a smart, simple way to grow your credit.
Step 5: Monitor Your Business Credit
Just like personal credit, it’s important to keep an eye on your business credit report.
- Check Regularly: The three main business credit bureaus are Experian, Equifax, and Dun & Bradstreet.
- Why It Matters: Monitoring helps you catch errors or fraud early. It also lets you track your progress as your credit improves.
Reviewing your credit report ensures everything is accurate and up-to-date.
Step 6: Explore SBA Loans and Lines of Credit
Once your credit is established, consider applying for an SBA loan or business line of credit.
- SBA Loans: These loans are designed to support small businesses and often come with lower interest rates and flexible terms.
- Lines of Credit: These work like a credit card, giving you access to funds when needed.
Both options can provide the financial boost you need to grow your assisted living business.
Step 7: Keep Credit Lines Open and Active
The age of your credit accounts affects your score, so keep your credit lines open—even if you don’t use them often.
- Why It Matters: Long-standing accounts show lenders that you’re a stable borrower.
Tip: Use older accounts occasionally to keep them active, but pay them off promptly to avoid unnecessary interest.
Patience Pays Off
Building business credit doesn’t happen overnight, but with consistent effort, you’ll see results. Here’s a quick recap of the steps:
- Form an LLC or corporation and get an EIN.
- Open a business bank account.
- Apply for a business credit card and use it wisely.
- Establish trade lines with vendors.
- Monitor your credit report regularly.
- Consider SBA loans or lines of credit as you grow.
- Keep your credit lines open and active.
By following these steps, you’ll create a strong credit profile, opening doors to funding and growth opportunities for your assisted living business. Remember, every step you take brings you closer to success!
Ready to Build Your Business Credit?
Starting your journey toward strong business credit can feel overwhelming, download our Business Plan Checklist to ensure you have a comprehensive business plan to help launch your assisted living business. Additionally, apply to our Assisted Living Investing Mastermind program to learn more about building a business plan, finding the property, securing funding, obtaining a license, and scaling your business.
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