Small business owners need to check credit reports

Thousands of stunned small-business owners call Dun & Bradstreet Credibility Corp. each week after they're turned down for loans. Jeff Stibel, CEO of the business credit-reporting company, has a message for them:

Don't blame the bank. Instead, he said, find out how you contributed to that rejection and work to improve your company's credit rating so that, next time, the answer is yes.

Small-business owners need to be just as savvy about their companies' credit reports as they are about their personal credit files. Whether you're hoping to get a loan, have been turned down for one, or are just running your business, you need to stay on top of what's in that file, Stibel said.

Many business owners don't realize a credit file exists for their business, or know what's in it, until there's a problem, such as a rejection for a loan. But other things can go wrong even after a company gets a loan or line of credit.

During and after the recession, banks cut the credit lines of many businesses, even those of companies that were doing well and paying their bills on time. Those actions were similar to the reductions that many homeowners saw in their home-equity lines of credit. It may be possible to undo that damage, Stibel said. A look at a credit report can help.

A common problem for many small businesses since the recession is that as they lowered expenses, they had fewer bills to pay, and fewer payments showing up in their credit files, Stibel said. Many might have vendors that don't report payments to credit-reporting agencies. But by working with the bank, vendors, and the reporting agencies, a business owner might get those payments recorded.

Don't wait for a problem to happen. Ask reporting agencies such as Dun & Bradstreet Credibility, Equifax, and Experian for copies of your company's credit reports, and be sure they're complete, he said.

You should also have a solid relationship with a banker before applying for a loan, Stibel said. A banker who knows you is more likely to reconsider a rejection based on an incomplete report.

"If you've got a long-standing good relationship . . . and you can prove you're paying the bills, banks will be incredibly flexible."