Business owners can glean quite a bit of information about companies, including their own, just by using business credit reports. These reports provide a snapshot of a company's financial status, showing creditors, debts, sales numbers and bankruptcies. In addition, monitoring this information on a regular basis can help you track trends over time.

Small business credit reports can help you when you're trying to decide when to extend credit to buyers, purchase interest in another company, gain a competitive advantage or just check to see how others will view your company. Credit reports for business can provide:

1. Basic company information. Biz credit reports often include annual sales, number of employees and EIN numbers, as well as information about the owners.

2. Risk assessment. In most cases, credit reports for business customers will include a credit score to help determine financial risk. This is similar to a consumer credit rating.

3. Myriad financial information. Business credit reporting usually includes a list of a company's vendors, the amount of debt they are owed and if the company is current or delinquent.

Action Steps
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Check your business's credit report annually

Business credit reports are similar to consumer credit reports in some ways, but in many ways, they are not, including the fact that they are not free. Business credit reports are not expensive, however, and owners should periodically check their reports to make sure the information is correct. Since business credit reports are public, ensuring that the contents of your company's report are accurate will help maintain your positive image.

I recommend: OPEN Forum provides a good overview of business credit reports. Find out how to improve your credit rating at Fox Interactive Media.

Enroll in a small business credit report monitoring program

A monitoring program usually gives unlimited access to a company's own credit report but also sends out notifications when there is activity. This helps you in a few ways. First of all, knowing what others can find out about you will help you in negotiations. If you know exactly what is in your report, you can be prepared to explain any mishaps and fight for the best credit terms. Also, credit monitoring can help you make sure your company does not become a victim of fraud. Lastly, it will help ensure that your accounts payable department is keeping on top of paying your creditors.

I recommend: Check out the case studies at Dun & Bradstreet to learn how monitoring and self-reporting can help your business. Experian Information Solutions, one of the three big reporting bureaus in the United States, explains the benefits of monitoring your business's credit report.

Keep track of other companies with business credit reports

If you're a manufacturer or wholesaler, it's a good idea to check out a buyer's financial status before extending credit terms. You can also use this information to set your terms, if you choose to offer credit. By running a credit report on another company, you can find out if it has any delinquent accounts, judgments, bankruptcies or liens. You can also see its sales figures and some other company information.

I recommend: Take a look at what TransUnion and Equifax can offer your business; these are the other two main credit bureaus.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  Business credit report information is also useful for keeping track of your competitors. Since you can track a company's payments to creditors, you can estimate a company's health. For example, if your closest competitor is getting further and further behind on its payments, you may want to consider offering a buyout deal and gain the market share that that company currently occupies.

Maintaining a good credit rating for your business is always important – but even more so in times when credit becomes tighter and more difficult to obtain on affordable terms. For small business owners seeking financing of almost any kind, a clean credit report goes a long way toward hearing “yes.”

Banks and other lenders are relying more and more on credit scores produced by major credit reporting agencies when making loan decisions. The reason is simple: It lowers their risk.

Having good business credit (in addition to personal credit) can save you money. Lenders and vendors extend better terms to good credit risks and are less likely to demand personal guarantees.

For many business owners, however, and especially startups, credit reports and ratings are alien territory. How do credit reports “happen” anyhow? Does your business even have one? If so, what’s in it and what can you do to assure it’s accurate?

Here’s a short-course in business credit ratings and reports:

What are they? A credit report on your business shows how you manage your financial obligations. Banks, credit card companies, utilities, phone companies and thousands of other business service providers report information on your business to the major credit reporting firms: D&B, Experian, Equifax and TransUnion. The credit reporting firms compile the data into standardized reports and create scores.

Do you have one? If you’re not sure, just check. You can search in the business sections of the credit reporting company websites. Generally, it’s free to simply find out if your business is in the database. But you may have to pay for a copy of a detailed report.

What’s in it? Financial information, such as major suppliers you deal with, outstanding balances, credit lines or business loans, your payment habits and trends (have you’re payments become slow lately, for example). Credit reports may also compare your payment performance with industry standards, and include “public record” information such as liens, judgments or bankruptcies. Basic demographic data will be there, such as years in business, type and size of business.

Scoring ABCs: D&B calculates a Paydex score as a key indicator of business payment performance on a 0-100 scale. The higher the score, the better. A business that always pays right on time might score an 80; above that you’d be paying early. So anything above, say, a 70 is considered pretty good in the eyes of potential creditors. Below that, and you’re a slow payer. But to even have a Paydex score, at least four companies must be reporting your pay habits to D&B.

A business credit report may also include a “DBT” score, which stands for “Days Beyond Term.” DBT is a weighted average number of days beyond the due date that a business pays its bills. Experian, for example, calculates DBT at +30 days. Thus, a DBT score of 5 means that the business pays its bills an average of 35 days after invoicing.

Establishing or improving a score: The credit agencies themselves, along with a variety of other services will help you establish a business credit report, including a full credit report with payment references, for a fee. According to Experian, however, one of the best ways to build and protect your business credit is to simply pay your utility bills on time. An easy way to do that is to sign up for automatic bill pay through your bank; no worries about late payments dragging down your credit score.

These resources can help:

• Experian just launched a helpful new website called BusinessCreditFacts.com with questions and answers about establishing and maintaining business credit. There’s also a tool to submit requests to update a business credit report, and ways to sign up for fee-based credit monitoring services.
• D&B has the largest business database of anyone, and most companies seeking to check your business credit profile will go here. You can get listed in the database with a unique DUNS number (an internationally recognized identifier) for free; or sign up for D&B’s CreditBuilder service that will help you build a complete credit profile.
• Your Business Credit specializes in helping small businesses establish or improve their D&B credit ratings.

Business.com's "What Works for Business" blog is a great way to keep up with the latest solutions, trends and strategies for small and medium business -- including business credit.

Just like your consumer credit reports can affect whether t you're eligible for a loan, your business credit reports can come into accord when you're looking for any kind of financing for your company. They can also be a determining factor when you're looking to expand the business in the future.

It's important to know how to make decisions that will result in strong credit reports for business. Proper business credit reports education and training can help you get there. Through this training you will learn:

1. How to establish a credit history for your business;

2. Decisions to make to ensure you develop and keep a strong credit rating;

3. The process required to obtain a business credit report.

Action Steps
The best contacts and resources to help you get it done

Learn how to establish strong biz credit reports

A strong small biz credit report is not born overnight. It takes some effort on your part to build a successful credit history. This is an important step in building business credibility and is definitely worth the time and attention.

I recommend: Read BusinessFinance's extensive tutorial on how to establish business credit. It will lead you through how to get listed with credit agencies and obtain your first business credit cards or loans. Once you've done that, head to Experian's website to read the credit bureau's requirements for creating business files. While you're there, view the sample business credit report.

Discover how to get small business credit reports to look over

Now that you have some credit, you should be able to find a small business credit report for your company. Get in the habit of checking it at least once a year. Be wary of sites that offer free business credit reports as they are often scams. Remember, it's better to protect your information by using a site you know is legitimate even if you have to pay a small fee.

I recommend: Read Experian's guide to ordering business credit reports for step-by-step instructions. Then visit Dun & Bradstreet's website and read about all the different credit report options that they offer. Be aware that anything you can order from that site is also available to consumers. Unlike consumer credit reports, business credit reports are not private. That makes it essential to clean up any questionable areas of your business' credit.

Maintain positive business credit report information

Once you've got your small business reports looking good, you'll want to make sure they stay that way. The first secret to doing that is to make loan payments on time every time. However, that is only one strategy you need to learn out of many.

I recommend: Read the article on LoveToKnow about how to improve your business' credit score. If you're just establishing credit, you'll definitely want to get that number higher. Then do some research on how to spot and correct errors. Bankrate is a good place to start.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  While you're ordering your own business credit reports, you may want to check out your clients and vendors. It can help you determine if those companies are contacts you want to keep over the long term.