Too often small-business owners don't keep track of their business credit reports, and most don't know their commercial credit scores.
Yet it is more important than ever for small businesses to stay on top of their business credit data, experts say. Lenders, suppliers and other creditors are increasingly turning to that information to determine a small business' risk, in addition to their traditional use of the owner's consumer credit report.
Business credit reports include a company's payment history and public record information, such as tax liens. A commercial or business credit score is based on the information in the report and is designed to give a quick read on how likely a company is to be late on its payments.
That's important information for a lender or a credit manager, who, at a small company, is usually the owner. The sooner a creditor discovers a negative mark on a company's credit report, the sooner it can take steps to manage or limit its financial exposure.
Interest in these small-business credit reports is soaring. Financial institutions, office-supply companies and other merchants traditionally have been hampered to a degree by the lack of credit information available on small companies.
To meet that demand, more credit bureaus have begun to offer commercial credit reports on small companies. Experian Inc. of Costa Mesa and Dun & Bradstreet of Short Hills, N.J., historically the main providers of business credit information, have created small-business databases in the last few years.
And major banks have banded together to form their own small-business credit information source, the Small Business Financial Exchange. The database is managed for them by Equifax Inc., the Atlanta-based powerhouse of consumer credit reporting.
The database has information on 22 million small businesses provided by the banks and other members. That information includes the businesses' rapidly expanding use of credit cards. Equifax is working to increase the depth of information available on each business, such as leasing information and non-financial data.
"We want to provide more of a 360-degree view," said Warren Beaty, senior vice president of North America commercial solutions at Equifax.
The growing quality of that view is appreciated by lenders, their small-business customers and small-business creditors who increasingly use a company's commercial credit data as a risk-management tool.
