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.
Need help figuring out where to start? Join the next Roadmap Challenge and build your launch plan with me.
Show full transcript 👇
Transcript
00:00:01
in a few of our previous videos we've been talking a little bit about how to get started with getting a credit card it's going to require you to look at your personal credit and that can be a little bit scary and and so a question that i often get and have seen is how do i build my business credit uh what's the process like for doing that and how do i get to the point where i don't have to rely so much on my personal credit and and worry about the taking a hit by myself we're gonna get
00:00:30
into that into today's video hi everybody i'm brandon gustafson i own and operate two assisted living facilities and i created this channel to help people like you learn the ins and outs of investing in assisted living welcome to assisted living investing [Music] back to the channel happy to have you here today in our last video we talked a little bit about how do you get a business credit card what's that process like what do you need to do in order to get that business credit card and today
00:01:06
we're going to be getting into how do you build business credit we talked a lot about needing your personal credit in order to kind of get started especially with a credit card but how do you get to the point where you've built up the credit um in your business so you don't have to rely on yourself and just rely on your own personal credit we're going to get into that in in today's video um one of the first things that you need to do is form an llc or incorporate your business and i've
00:01:30
talked about kind of business structures and llc's i'll link that up above so you can go and watch those videos and learn a little bit about llc's and how they how they work you know it it is possible for you to get a personal credit card and use it for your business you could do that um but a lot of and really a lot of business owners do that but it's it's best to kind of keep things separate we've talked about this a lot in the past it's best to keep your business life and
00:01:58
your personal life separate so you just don't run into any issues and having that entity created and properly structured is just going to help you keep things separated but it's also what you need in order to start building business credit so in addition to the benefits that you get from creating an llc it's also going to help you start building this business credit which is going to help you out in the long run as well especially as you're going you're planning to be an assistive
00:02:26
living facility for the long haul you want to kind of keep these things separate it's just going to benefit you quite a bit there now as far as building your credit once you've formed your llc and you have your ein and your tax id number um you can apply for a credit card or you can get a loan something like an sba loan like like i've done in the past and i'll talk about sba lending up above in a previous video um so and also um getting a credit card and kind of what that process is like and
00:02:56
what you should look for in getting a credit card but you'll also want to open a business bank account um is another key thing that you all want to do it's not necessary in order for you to get a credit card but to help you start building your credit having that bank account in place is going to help you keep those finances separate and start developing a relationship with the bank so they can start reporting to the business credit bureaus which is going to help you out as well you know that way you can make sure
00:03:28
you're also making those payments on your credit card or loans or anybody else that you're working with that needs to get paid on time with those vendors and things like that there's a lot of advantages to having that business bank account that we've talked about again in a previous video but another big one is it's going to help you build your credit and so that's going to be something that's key for you to do the next thing would be using business credit cards um to build your credit right so getting a
00:03:56
business credit card is really a great way to start building that credit it's just like you know when you're a teenager or you're young or you're doing this for your children you're you get them a credit card when they're when they're young or you add them as uh an authorized payee or something like that i can't remember what it's called on your credit card to help them start building your credit is very similar to that getting a credit card is going to help start building that credit up so
00:04:20
that you have a history which is what you need really when you're starting to build that credit so some ways that you can build that credit are with a credit card is making sure that you're making your payments on time and do it every single time i can't stress that enough don't skip a payment even if you're not making the full payment make at least the minimum payment you don't have to pay off that full balance every time dave ramsey would tell you otherwise and and you should do that i'm not
00:04:46
telling you not to do it but you don't have to do it but make sure you are making a payment every single time right so just make sure that you're doing that if you need to carry a little bit of a balance to to help you out that's okay um actually carrying a little bit of a balance can help your credit our companies like that um and so it's just gonna kind of help you out a little bit there but i personally like to pay everything off in full on a monthly basis um or even more frequently than that
00:05:17
but make sure at least making that minimum payment that's going to be the big thing that you could do next would be getting loans or lines of credit with other lenders that report to business credit bureaus so something like an sba loan is is going to be great in helping you build your credit those types of things just making sure you're making those payments on a regular basis it's going to help you out a lot in building your business credit and once you've opened up an account
00:05:44
make sure you keep it open and active so closing a line of credit one of the big things that the credit card companies take into consideration when they're looking at credit and uh the credit bureaus will look at is length of time that the credit the line of credit is open and so the longer that you have it there the more stable you are the more stable you look as a user of credit and so your credit core credit score will increase and so once you've opened a line make sure that it stays open and make
00:06:15
sure you keep it active and you can do that easily enough by just making purchases with it on a regular basis but if you say you you have been using this card for forever and you said i'm gonna get a brand new card and start using that you forget about the old one and it's been two years and you've never used it the credit card company may just go in and close that that's going to hurt your credit so make sure that you keep that card open keep it active make sure that you're using it on a consistent basis
00:06:43
but doing those things are going to help improve your your credit score because if you if you don't do that it's just going to hurt your your credit and it's it's in addition to improving your credit it's always nice to have just an extra line of credit having multiple credit cards while it can be difficult to balance and something that you want to take into consideration is this something i'm comfortable with but if you do that you could open up you know two lines of credit that have ten thousand dollars on
00:07:13
each of them and now you have twenty thousand dollars in credit that could help you in the event of a big issue which um you know you hope doesn't happen but if you have a furnace go out or um you buy all new beds for all of your residents or you know who knows what is going to come up where you just need to float that payment for a little bit or kind of finance that payment for a little bit of time those lines of credit are a really good opportunity for you to do that and the more that you have available to you
00:07:42
the easier the less stressful it's going to be as long as you're staying on top of it and and using the credit how uh you should be using it the next thing is uh to monitor your credit so once you've got your your cr your everything in line you've got your credit card you've got your loan and you're building your credit you want to make sure you're keeping an eye on it making sure that you know something like a fraud doesn't happen um and and things are looking the way that they should
00:08:09
somebody's not opening a new line of credit under your tax id or anything like that the business credit bureaus are actually a little bit different from the personal ones so there's dun and bradstreet is the first one and then the other two are similar to the to your personal credit companies equifax and experian are two names that you've heard but done in bradstreet is the other one that you probably have not heard of but you want to be aware of who those are and make sure that you're just kind
00:08:36
of checking in with them if you do an internet search and you know search for how do i check my business credit you're going to find all kinds of resources on how you do that and how you can kind of stay on top of it and suggestions on how frequently you should be monitoring your credit but those are things that you want to make sure you're doing because having somebody open up a line of credit or having an unauthorized whatever get open on your account under your social security or your ein
00:09:03
is going to hurt your credit card so make sure you're monitoring it very similar to your personal credit you just want to make sure that you're keeping an eye on it and then the last thing is to just be patient your credit score it doesn't going to change overnight it's just not going to happen and so you need to just make sure that you are patient with it and make sure you're understanding that it's going to take years for you to build that credit up once you get to the point
00:09:29
where you've got good credit it opens up a lot of doors a lot of possibilities for you and your business so just be patient and everything will work out fine in our next video we're going to be getting into what is the best small um the best small business credit card i'm going to be talking a little bit about that and how you can determine what is best for you and your company and your business as you're getting up and getting started uh and then just a reminder to if you want to learn more about investing in
00:09:59
assisted living make sure you visit me on assistedlivinginvesting.net on my website i have some free content free resources you can set up a consulting call with me i'd love to have a conversation with you and make sure you follow me on my other social media platforms so we can continue the conversation over there and remember it doesn't take a lot just a little bit keep step by step by step you will be successful if you just keep making progress every single day you'll be fine you'll be successful you can do this
00:10:27
thanks for watching and have a great day [Music] you
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