Today more than ever, small businesses must be proactive in protecting their important credit assets. In this still-fragile economy, credit scores and indices can make the difference between a company’s ability to fail or succeed.

Just like consumers, scores play an important role in determining business credit. The right credit score is invaluable when negotiating lower lease payments, getting business loans approved, or when a potential customer chooses a company for business-to-business (B2B) services.

Credit challenges can come in many forms. The sad reality is that a late payment or collection account for a specific debt listed on a company’s business report can lower the score by more than 40 points. This will immediately place a company in the high risk category! The amount of information processed into consumer and business credit scores is large and complex.

The important points that small business owners need to know in order to give a business access to financial tools that can help them land bigger clients and earn more income are:

Dun & Bradstreet Credit Score and Rating is the oldest and most popular provider of business credit scores and ratings. Businesses with low D&B scores may be denied loans, cut or close extensions of credit, be turned down for offers and services by potential customers, or have their products removed. There are quite a few scores and ratios used by this business credit bureau.

The Paydex score is used to assess creditor payment patterns and is dollar-weighted based on the provider accounts listed on a company’s report. Paydex scores range from one to 100. A strong Paydex score (80) gives a business access to financial tools that can help it land bigger clients and earn higher revenue. Below 60 could mean many defaults or very little credit history. In this case, a business is likely to have trouble getting loan approvals, credit extensions, or, at best, paying higher rates for leases.

A financial stress score is designed to help predict a business’s potential for failure. Indicates the probability that a company will obtain legal relief from creditors or cease operations without paying creditors in full within the next year. The score uses the full range of D&B information, including financials, comparative financial ratios, payment trends, public filings, demographics and more.

Businesses have recently experienced challenges with these credit scores and their ability to meet business objectives. A fast-growing IT solutions and network provider found itself caught in a frustrating down cycle. When your existing customers delayed payments on time, it caused a ripple effect of slow payments to vendors. It was agreed that they needed a daily credit check by a reputable credit restoration company and improvements to offset the dilemma of the current credit problem. To date as soon as an issue arises it is addressed and scores can be maintained if not increased. Legitimate commercial credit repair companies can improve credit scores by changing and adding information that can offset initial reductions and manage better scores. Some larger corporations like Wal-Mart won’t even look twice at potential suppliers with a risk score higher than six on their Dun and Bradstreet credit profiles. Causes of poor credit range from a bookkeeper making late payments to such major situations as accounts receivable that cannot be collected causing invoices to be late. But once the damage is done, it’s an uphill battle, and fully understanding the consequences is, at best, a heavy burden. Without constant care, a business can really suffer these credit dips.

Credit Fluctuations – Another credit challenge we’ve seen affecting small businesses is when credit scores are currently in excellent shape, but have shown negative fluctuations in the past 12-24 months. A Westchester doctor who started his own practice and applied to lease equipment was turned down due to a history of low scores. A collection appeared in his reports constantly over a period of seven months. Although the charge was a mistake and the bureau agreed to remove it from his profile, his past criminal history was still visible. Although his current score was excellent, he was unable to obtain the financing he needed under his business name. Fortunately for him, his personal credit scores were excellent and he was able to personally sign the team’s loan.

Being proactive and making sure scores are managed by a professional or someone within the company who can handle this task efficiently and responsibly can save huge financial costs and stress. It is essential that small business owners stay abreast of current scoring requirements. In this economy, the right sources providing cutting-edge information can make a world of difference.