U.S. Markets closed

Here's How Small Business Owners Can Track Their Credit Reports For Free

Daniel B. Kline, The Motley Fool

When you start a small business, it will initially have no credit history, and its ability to get loans, credit cards, and extended payment terms from vendors will generally relate directly to the owner's credit rating. That changes as a business matures and it has its own credit reports.

That's something not every small business owner is aware of. Nearly one third (31%) of small business owners have either never heard of business credit reports or know very little about them according to a new study from Capital One. And only 45% of those surveyed had actually seen theirs -- though of the ones who had, 77% said it helped them get a higher credit limit, 76% said it got them better terms on loans, and 73% said that viewing their business credit report had a positive impact on their company.

To help all small business owners unlock those benefits and get access to their credit reports, Capital One launched Business CreditWise, which provides free, unlimited access to a company's credit profile in a way that doesn't impact the company's credit. The tool is available to all small business owners, not just the bank's customers. 

A business credit application

Before you apply for business credit, you should know where your company stands. Image source: Getty Images.

Why is this important?

A business needs to understand its credit the same way an individual does, or else it runs the risk of not being able to meet its financial demands. If a company understands how lenders, vendors, and credit card companies view its financial standing, it can better capitalize on opportunities and obtain needed cash to scale the business.

"Business credit is a critical component of a company's ability to secure financing, yet our research shows less than half of business owners have ever viewed their business credit reports," said Jenn Garbach, small business marketing head at Capital One. "Our goal is to empower businesses with products and tools that help them succeed and grow."

Having access to their credit report also allows business owners and managers to correct any mistakes or identify places where they can improve. It also shows useful information like how many accounts are open, how much available credit they have, and any negative public records like bankruptcies, liens, or judgments.

Why is this being launched?

Capital One is providing this free service for all business owners, but it's not doing so solely out of benevolence. Business CreditWise could certainly act as a marketing tool for the company, exposing small business owners to the bank and putting it on their radar at a time when they need a checking account, loan, or credit card.

The tool solves a need small businesses have by offering information that has been hard to come by. Business CreditWise operates a lot like the personal credit tool Capital One launched in 2016. It's an easy-to-use format that allows companies to dispute inaccuracies by submitting disputes to LexisNexis Risk Solutions, also free.

Small business owners will benefit from having access to this information, and they should be able to use it to manage their finances better. Checking this informational regularly is as important to business owners as checking credit reports is to consumers -- and the need to have a top-down look at your small business's financial rating becomes even greater when applying for credit, or trying to lease or buy space at the best rate possible.

More From The Motley Fool

The Motley Fool has a disclosure policy.