By Thomas Fernandez

 

Last year, I attended my first Child Care Genius conference. I remember wearing an orange bracelet that said, “I am a childcare genius,” looking down at it, and thinking, “I’m not a genius at anything.”

It made me laugh, but it also got me thinking. You don’t have to be a genius to build a successful business. You do need to be willing to learn, grow, ask good questions, and make better decisions as you go.

That idea has stayed with me, especially when I think about the financial side of running a child care business. Lending, credit, leases, and financial structure may not be the parts of the business owners talk about most often, but the decisions made in those areas can affect your profitability, your ability to grow, and the amount of freedom your business can ultimately give you.

I’ve spent many years working in lending, collections, and commercial real estate, and one thing I’ve learned is that financial decisions rarely exist in isolation. A financing agreement that seems manageable today can affect cash flow for years. The terms of a lease can either protect profitability or quietly chip away at it. Strong business credit can create options when an owner is ready to expand, while weak financial preparation can make a good opportunity much harder to pursue.

So here’s a question I think every child care business owner should consider:

What financial decision has been the most difficult in your business so far?

Maybe it was financing an expansion, signing a lease, taking on debt, purchasing a building, or trying to decide which lending option actually made sense. The point isn’t to second-guess every decision you’ve made. It’s to understand the financial side of your business well enough that you’re better prepared for the next one.

Because child care businesses don’t struggle solely because of enrollment challenges. Sometimes the bigger issues come from financing decisions, poor leasing agreements, or weak business relationships that quietly create stress behind the scenes.

 

Why Relationships Matter

Relationships have always mattered tremendously to me in business.

Over the years, I’ve learned that your reputation, your character, and who you choose to do business with can impact your future just as much as the numbers themselves. I’ve always believed in working with people I trust and people I genuinely like. Strong business relationships often create better communication, better opportunities, and stronger long-term outcomes.

One of the things that fascinated me as I began learning more about the child care industry was realizing just how strong and resilient this industry really is. Child care is not a luxury. It’s a necessity. Families depend on it. Communities depend on it. Employers depend on it. That creates something lenders appreciate very much: predictable recurring revenue.

From a lending perspective, child care businesses can actually be very attractive because tuition creates ongoing monthly income streams, and many centers have strong retention with families who stay for years. Add in subsidy programs and waiting lists, and many child care businesses become surprisingly stable models compared to other industries.

But stability in the industry does not automatically mean stability in the business itself.

 

Financial Control Creates Freedom

That’s where financial control becomes so important.

One of the biggest mistakes I see owners make is mixing personal and business finances together. From my experience over the years as a lender, I would strongly encourage owners to separate those worlds as much as possible. Business accounts should be business accounts. Personal accounts should remain personal.

Managing liability is also extremely important. The more protection you can create between yourself personally and your business through proper structures like LLCs and strong legal protections, the better positioned you’ll be long term.

I also encourage owners not to automatically accept the very first financing offer they receive. Relationships matter, absolutely. I was a lender for many years, and I loved being able to work repeatedly with the same people because trust had already been established. But even with strong relationships, you still need to understand the market and evaluate your options carefully.

And never negotiate out of fear.

Most lenders are not trying to intimidate you. In fact, good lenders want to help you succeed because your success benefits them too. If someone feels overly aggressive or pushy, that may not be the right person to work with in the first place.

Financial skill ultimately determines long-term freedom, which is why establishing business credit is so important. Many owners either don’t have business credit established properly or don’t even realize whether they do. Setting it up is not nearly as complicated as people think. It starts with simple things like having an EIN number, a business bank account, a business address, and a business phone listing.

Then there are tools like Dun & Bradstreet and a D-U-N-S number, which help establish your business profile within the commercial credit world.

Strong business credit creates leverage. It can help create larger lending limits, stronger lender perception, and less personal liability exposure over time.

 

Building Strong Financial Habits

One of my golden rules has always been to pay early, not just on time. Get ahead of the curve whenever possible because strong payment history matters tremendously in both personal and business credit reporting.

The same way your personal mortgage, car loan, or credit cards report to your personal credit profile, your business relationships can create reporting trade lines for your company. Office suppliers, insurance providers, fuel companies, maintenance accounts, and equipment vendors can all contribute to your business credit profile over time.

And yes, owners should absolutely monitor their business credit regularly.

Many people monitor their personal credit through services like Credit Karma, but very few pay attention to their business credit profiles. Services like Nav, Dun & Bradstreet, and Experian Business allow owners to monitor what lenders are seeing about their companies.

The stronger and more organized your business appears financially, the more confidence lenders typically have in working with you.

That preparation matters more than most owners realize.

When lenders evaluate child care businesses, they generally want to see a few key things: tax returns, clean profit-and-loss statements, enrollment trends, waitlist data, owner experience, and a basic business plan. It doesn’t need to be overly complicated, but owners should absolutely have something in writing that outlines the direction of the business.

The more prepared you are financially, the more confidently you’ll be able to make business decisions. Owners who understand their numbers, organize their documentation, and know what lenders are looking for often walk into financing conversations with far more confidence than owners trying to figure everything out in the moment.

One of the key things lenders evaluate is something called a debt service coverage ratio, which helps determine whether a business realistically generates enough income to comfortably support its debt obligations. At its core, the calculation simply measures whether your incoming cash flow is strong enough to cover what’s going out each month.

That’s why financial visibility and understanding your numbers are so important as a business owner.

 

Debt Should Create Growth

There are many different loan types available, including SBA 7(a) loans and SBA 504 loans, which are commonly used within business and commercial real estate financing. Both can be powerful tools when used properly, but owners need to understand the structure, interest rates, terms, and risks involved before signing anything. 

One thing I always caution owners about is variable-rate debt. We’ve all seen what changing interest rates can do during difficult economic periods. Variable-rate loans are not always bad, but owners should fully understand the terms and have a plan long before problems arise.

Always do the math for yourself.

No matter how good an opportunity sounds, take the paperwork somewhere quiet and evaluate the numbers independently. Never rely solely on someone else’s explanation. Even if you trust the lender, it’s still your responsibility to fully understand the commitment you’re making, especially when you may be locking into terms for ten, fifteen, twenty, or even thirty years.

Debt itself is not automatically good or bad. The real question is whether the debt is helping move your business forward.

Strategic debt used to acquire profitable businesses, purchase buildings, expand strategically, or increase profitability can absolutely create growth opportunities. But borrowing money simply to continually cover losses rarely solves the real issue.

You cannot borrow your way out of operational problems.

At some point, owners must identify the actual issue, fix the leak, and create a true strategic turnaround plan.

Financing should serve you, not trap you in servitude. If the debt is not helping move the business forward, then it may actually be pulling the business backward instead.

 

Protecting Yourself Through Better Agreements

That same mindset applies to commercial leases as well.

As part of handling commercial real estate for Child Care Genius, I spend a great deal of time reviewing leases, and I can tell you that lease negotiations matter tremendously. Owners should negotiate rent increase caps whenever possible, build strong renewal options into agreements, secure signage rights, and pay close attention to maintenance responsibilities.

Too many owners sign leases without fully understanding who is responsible for major expenses like HVAC systems, roofs, parking lots, or common area maintenance charges. Those details can significantly impact profitability over time.

And document everything.

One of my former bosses used to say, “Nothing leaves this place without a copy,” and that mindset stayed with me. Good documentation protects businesses, strengthens communication, and prevents misunderstandings later.

 

Communication Changes Everything

I also want owners to understand that difficult seasons do not automatically mean failure.

One of the most important lessons I learned working in lending and collections was that communication matters tremendously during hard times. Businesses experience challenges. Life happens. Economic downturns happen. Enrollment dips happen.

The key is communication.

When problems arise, communicate early instead of avoiding the conversation. The best business partnerships are collaborative, not adversarial. Good lenders and good vendors often want to help because helping you ultimately helps them too. But owners who disappear, avoid communication, or wait until situations become catastrophic usually create much bigger problems for themselves.

Crisis should become a chance for communication, not silence.

Ultimately, all of this works together to create something much bigger than simply getting approved for a loan or securing a better interest rate.

Business credit, financial preparation, strong lender relationships, thoughtful debt management, strategic planning, lease negotiations, and clear communication all work together to create long-term business freedom.

I remember leaving that first Child Care Genius conference last year thinking about something bigger than the financial decisions we make today. I was thinking about legacy—what we’re building, who we’re building it for, and what we hope it makes possible in the future.

For me, that’s personal. I want to leave something meaningful behind someday for my son, my family, and the people I work with. I know many child care business owners feel the same way about what they’re building. A strong business can support your life today, but it can also create opportunities for your family, your team, and the people who come after you.

That’s what financial control is really about. It’s not simply about making more money. It’s about building something stable, healthy, and strong enough to create choices and opportunities for years to come.