By ANGUS LOTEN

For small-business owners, the consequences of a bad credit report can be dire.

A low rating prompts banks and other lenders to charge more interest, or reject an applicant for a loan or line of credit, of course. But beyond that, a low score also may prompt suppliers to demand shorter payment periods, or even cash-on-delivery. The resulting pinch in cash flow can leave businesses unable to finance new sales, grow inventories when demand rises or even pay their workers at the end of the week.

Generally small businesses don’t have large cash reserves to help them manage unexpected gaps in the business cash flow. Thus, roughly half of the nation’s estimated 28 million small businesses—most which are sole proprietorships—operate with some form of trade credit, by deferring payment for goods and services to keep their businesses running and cash coming in, according to a report last year by the National Federation of Independent Business, or NFIB, a Washington-based advocacy group for small firms.

As such, trade credit is the largest source of business financing in the U.S., with billions of dollars exchanged daily, according to National Association of Credit Management, a credit industry advocacy group.

Typically, trade credit is extended for an agreed-upon period, often between 30 to 60 days, with hefty fees charged by sellers for late payments, says Rohit Arora, chief executive of Biz2Credit, a New York-based small-business lending broker. In setting those terms, he adds, suppliers and vendors often consult a company’s credit report with such services asDun & Bradstreet Corp., DNB -2.45% Experian EXPN.LN -0.09% PLC or Equifax Inc.EFX -1.62%

Many of these services start developing a company’s credit report at the time it incorporates, tapping public records and other available financial data—without the business owner being aware of it. Consequently, there are “a lot of businesses out there that don’t even know they have a credit rating,” says Craig Everett, assistant director of the Pepperdine Private Capital Markets project at Pepperdine University, which analyzes small-business financing. Yet credit ratings are particularly critical to the health of small businesses now, because bank credit has been tight and sales at many small firms have been weak.

Just one in three small-business owners has checked his or her business credit report within the past two years, according to a March survey of 889 small firms by The Wall Street Journal and Vistage International, a San Diego-based executive-mentoring group. Of the firms that did check their reports, one quarter said they found errors, or missing financial data that put their business in a riskier category, according to the survey results.

Seven percent of small U.S. businesses in January 2012 reported that they were denied trade credit by a supplier or vendor at least once in the previous 12 months, according to an NFIB survey of 850 small-business owners.

What business owners see as “mistakes” in their reports are often the result of missing bits of data, such as sales and revenue figures—or even timely bill payments that go unreported by suppliers and other clients, says Mr. Arora of Biz2Credit. Yet, from a credit-report standpoint, missing data is reason enough to classify a business as risky, since lenders and suppliers have less to go on when gauging whether a business will pay its bills on time.

The data also “can be very outdated,” Mr. Arora says, referring to a company’s bill-payment history, which is typically supplied by its creditors on a voluntary basis.

Fixing these discrepancies isn’t always easy. A survey in May 2012 of 300 small-business owners by the National Small Business Association found that 23% had difficulty disputing or correcting a mistake with a debt collector or credit-report firm.

One reason is that most credit-report services guard the anonymity of sources that provide them with bill payment records, such as a company’s suppliers, vendors and other customers. Naming them would “put a chill over the industry,” since many don’t want to risk losing customers—even those that are slow to pay their bills, says Brian Shappell, a government liaison with the National Association of Credit Management, a credit-industry advocacy group.

Mr. Shappell, who is also certified credit-business associate—an academic designation certifying expertise in accounting, financial statement and business credit—says the best strategy for small firms is to keep close tabs on their credit reports and alert credit-report services about missing or questionable data. Creditors tend to reassess a company’s creditworthiness on an continuing basis, he adds.

While third-party firms can charge hundreds, and even thousands of dollars, to manage a company’s credit report, Mr. Shappell says many business owners aren’t aware that in most cases they can reach out to credit-reporting service themselves and have mistakes fixed without charge.

“A little education would probably go a long way here,” he says.

Write to Angus Loten at angus.loten@wsj.com