Business credit cards without a personal guarantee

Business credit cards without a personal guarantee
Luke Loftin
on March 19, 2020
Read in 5 min

Finding a business credit card that has no personal guarantee can be difficult. Most credit card offers seem to require that you act as a guarantor before they’ll agree to give you the card. That’s because credit cards are a type of unsecured loan, which means banks will usually require some form of protection if you or your business are unable to repay the funds. That’s why most banks will require a personal guarantee for business credit cards. It’s exceptionally tough to find a business card with no personal guarantee, although it’s not impossible.

What is a business credit card personal guarantee?

To better understand the entire concept, it’s important to cover the idea of a personal guarantee, and what it actually means. Think of a typical business loan. When you guarantee that loan, you’re telling the lender that you will personally be liable and pay back the loan should the primary borrower, such as your company, not be able to. It’s important to remember that lenders take a risk when they give funding to borrowers. They need to be able to ensure to the best of their ability that they will be able to recuperate their losses in case the funds are not returned to them. Especially if you don’t have the best credit, or if your business is just starting out, the bank will need some form of security to feel more comfortable loaning you money.

Similar to loans, small business credit cards most likely will include some terms that deem you personally liable for paying back the funds should your business fail to do so. In fact, this is why credit card issuers will ask about credit score before they agree to give you the card. They want to make sure that you are a reputable borrower so they can reasonably expect that you’ll pay your bills on time.

And one misconception not to fall into is the idea that your corporation will protect you from all personal liability. It’s true that registering your company as an LLC may protect you against certain types of litigation (your company will be on the hook for some litigation, but not you personally.) However, when it comes to business credit card debts, this type of protection does not apply in the same way. You will still be responsible for paying back the debt even if your company is an LLC or another form of corporation.

Is it possible to get a business credit card without a personal guarantee?

It is possible to get a business credit card without a personal guarantee, but frankly, it’s not likely. Getting a new business credit card with no personal guarantee is more about factors relating to you and your business, rather than the card itself:

  • Your business’s financial situation
  • Your credibility
  • And your relationship with a potential lender.

 business credit card

There are no business credit cards that universally have no personal guarantee requirement, so getting this type of arrangement will require a special circumstance for you and your business.

If you have a good relationship with a bank, this can be essential for securing a business credit card with no personal guarantee. If your business has strong financials, low debt, and proof of reputable payment history, that is a good first step. Your business might be able to negotiate an arrangement with no personal guarantee. Or, if you’ve already had a business credit card for a good length of time, certain banks or lenders may be willing to waive a personal guarantee, since your business has already proven to be a trustworthy borrower and credit card user. The bottom line is to establish trust. There’s virtually no way to secure a credit card without a personal guarantee if you don’t have established trust with the bank or lender offering the card. That’s why new businesses may find it especially difficult to get one. Such type of arrangement is usually a case-by-case basis, so proving that your business can be trusted with credit is essential.

Another crucial factor if you hope to try and secure a credit card with no personal guarantee is the size and revenue of your business. Again, this type of credit card arrangement is uncommon, but a more established and bigger business may have a better chance of avoiding a personal guarantee. Some credit card issuers may have a threshold for time in business, and if your company surpasses this threshold, you might be able to snag a credit card with no personal guarantee. Of course, one important caveat to note is that many of the institutions who issue such cards are not banks or lenders, but stores, like gas stations or grocery stores – which means your spending potential may be limited to certain products or locations.

Business credit cards that don’t affect credit score

Again, it’s important to remember that almost every bank or lender will most likely require a personal guarantee on any credit cards you or your business choose to take out. Especially for small business owners, it’s virtually impossible to get a deal that doesn’t require a personal guarantee. But there are still options if you’re looking for credit cards that can be advantageous for businesses or small business owners. For example, there are some credit cards that may not affect your credit score, which can be a huge boost to new businesses or business owners who need some extra help with their credit.

There are some important elements you should keep in mind when looking for a business credit card that suits your needs. Obviously, credit card issuers are going to be concerned with your credit. Credit is one of the best ways for a bank or lender to know how well a business can be trusted with a credit line or capital, so it’s an important benchmark. But some credit cards may only initiate a soft pull of your credit. A “soft pull” means your credit score won’t be impacted when they check it. Whereas a hard pull shows up on your credit report and may cause a small dip in your credit score. If possible, check to see if a credit card issuer will do a soft pull or a hard pull before granting you the card. American Express, for example, is one credit card company that often does soft pulls instead of hard ones.

And there’s another factor to consider when searching for a business credit card. Some cards will report usage statistics to credit bureaus, which can affect your credit score. These stats include your amount of debt, active credit limit, and of course whether or not you are making payments on time. But some cards by certain issuers do not report such statistics; a few of these cards are issued by:

  • Citibank
  • Wells Fargo
  • BBVA
  • and Bank of America.

And US Bank and Chase will only report accounts with multiple delinquencies. As a counter-example, Capital One and Discover do report usage statistics to bureaus, so keep that in mind as you search for the right business credit card.

Now, in certain instances, it may actually be in your benefit to have a business credit card which reports to credit bureaus. If your business is able to make payments on time and keep a low debt-to-credit ratio, then keeping a business card which reports to bureaus can actually help boost the credit score of your business. And of course, a higher credit score means more potential opportunities for other more competitive terms on credit cards, lines of credit, loans, or other sources of funding.

As you can see, there are a lot of factors to consider when searching for a business credit card to suit your company’s needs. Unfortunately, it may be difficult or impossible to find one that doesn’t require a personal guarantee, especially for startup companies. But that being said, there are alternatives and other benefits to consider when looking at various different business credit cards.

Do the research, think long and hard about your business goals and the reality of your business operation (is the company a large established business, a start-up, or somewhere in between), and you’ll be able to make a decision that best suits your company’s needs.

If a credit card turns out not to be the right solution for your business, there’s always secured and unsecured business loans to consider. If you’re wondering how to get a loan for corporate purposes, there are a number of options out there. A business owner may request a loan from a bank, or they may go searching online. Whatever method you choose, chances are you can find some funding, as long as your business meets certain qualifications.

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Disclaimer: This is not legal or financial advice. Please consult a legal or financial advisor for your specific situation.

Luke Loftin Finance Journalist

Luke is a writer and editor based out of Los Angeles.

He specializes in finance, as well as health and wellness.

In his free time, he enjoys watching Astros baseball.

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