Guest Column by Dean Swanson

Obtaining capital and managing cash flow can be daunting tasks for today’s small business owner.  SCORE’s latest infographic highlights the financial difficulties and opportunities for small businesses.  I was amazed at the details of this topic and they may surprise you.

Bridget Weston Pollack, vice president of marketing and communications at the SCORE Association, gave a great summary of this data which is based on a survey by the Federal Reserve Bank of Cleveland.

Pollack reports that “small business daily income averages just $7 per day above daily expenses. Health-care services see the greatest net income at about $21 per day. That’s far higher than the average net income at restaurants ($11 per day), professional services companies ($7 per day), repair and maintenance businesses ($6 per day), retail outlets ($4 per day) and personal service businesses ($3 per day).”

Small business CEOs have a harder time obtaining bank loans than big businesses. For companies with revenues under $5 million, only 38 percent of those attempting to secure a loan were successful. Meanwhile, 70 percent of businesses with revenues between $5 and $100 million who seek a loan are successful. Common rejection reasons from a survey of more than 200 business owners included:

•25 percent: Quality of earnings and cash flow

• 21 percent: Size of company

• 19 percent: Insufficient operating history

• 18 percent: Insufficient credit

But did you know that small business owners are less likely to have revolving bank cards with balances more than 90 days past due? Small business owners have an average credit score of 721, according to a study by ACA International. That’s 48 points higher than the average consumer’s score of 673.

So, what can a small business do right now to build or maintain a strong business credit profile? I checked with Ty Kiisel, the author of “Getting a Business Loan: Financing Your Main Street Business,” as well as a contributing editor for OnDeck, an online platform where millions of small businesses can obtain affordable loans with a fraction of the time and effort that it takes through traditional channels.  He suggested the following:

1. Make sure your profile is accurate: The credit bureaus like Dun & Bradstreet, Experian and Equifax (the big three) are motivated to maintain accurate information — so they want business owners to review their profiles, and correct any errors.

2. Keep your business credit and personal credit separate: The higher balances that often accompany business expenses can hurt your personal credit, and they don’t help you build a strong business credit profile.

3. Establish trade accounts with your suppliers: This is a fairly easy way to start making a positive impact on your credit profile. 30- or 60-day payment terms with suppliers can be an important step to build a strong business credit foundation.

4. Make sure your suppliers report your good credit behavior: If they don’t report to the bureaus, you may be building a good credit reputation with that particular vendor but aren’t doing anything to build a good credit profile.

5. Use the credit you need and stay current: Building a strong credit profile is about demonstrating that you can use the credit you need and stay current with all your credit accounts.

For a better chance at obtaining a loan for your small business, visit a small, local bank. They approve loan applications from small firms far more often!

Want to improve your chances of finding financing for your small business? You may want to visit www.score.org and check the “articles” section or download a free financial management workbook for guidance on every aspect of small business finances. Then meet with a SCORE mentor to discuss your finances and small business goals.

Dean Swanson is past chairman of the Southeast Minnesota SCORE chapter.