Are you looking for a business credit card that doesn’t require a personal guarantee?
It may seem like every single card offer requires you, as an individual, to serve as a guarantor. Small business lending can be risky, and since credit card loans are unsecured, banks want an extra line of defense in case your business can’t pay its debts. As a result, almost every bank asks for a personal guarantee on business credit cards.
That said, it is possible to waive the personal guarantee requirement—not because of the card you apply for, but because of your relationship with the bank. We’re breaking down exactly what the personal guarantee means, how you can (at least try to) get it waived, and the top business credit cards without personal guarantee requirements.
What Is a Business Credit Card Personal Guarantee?
First, let’s dive into the mechanics of a personal guarantee. In a nutshell, when you guarantee a business loan, you’re saying that you’ll personally pay off the loan if the primary payer (your business, a co-signer on a personal loan, etc.) defaults.
Most small business credit card terms include a clause saying that you’re personally responsible for paying off the balance if your business can’t do it.
It’s important to know that personal guarantees hold whether you’re an S-corp, C-corp, or LLC. Registering your business as an LLC limits your personal risk if, say, your company gets sued, but it doesn’t let you off the hook on your business credit card debts.
How Can I Get a Business Credit Card Without a Personal Guarantee?
There are two ways you can get business credit cards without personal guarantee requirements, both of which rely on your business’ financials and credibility, rather than the cards themselves.
- Use your relationship with the bank. You might be able to negotiate your way out of a personal guarantee based on a solid payment history, good business financials, and a low debt-to-credit ratio. Some banks will waive the personal guarantee after you’ve had the card for a while, made your payments on time, and built up your business credit rating. If you already have a line of credit with a bank, the bank may waive the personal guarantee requirement on subsequent rounds of funding.
- Meet banks’ size and revenue requirements. Larger, more established businesses might be able to escape the personal guarantee based on their track record. For example, the Sam’s Club Business MasterCard doesn’t require a personal guarantee for businesses with at least $5 million in revenue.
Which Business Credit Cards Won’t Impact My Personal Credit Score?
As we mentioned, almost every bank wants a personal guarantee unless your business meets certain requirements or you negotiate for a personal guarantee waiver after the fact.
However, not all business credit cards will impact your personal credit score.
After you take out a business credit card, your bank reports your usage (think on-time payments, debt-to-credit ratio, credit limit, etc.) to business credit bureaus.
However, not every bank reports your usage to personal credit bureaus. This can be helpful if you need to carry a balance on your business credit card and don’t want it to negatively impact your credit utilization. Discover and Capital One report business card usage to personal credit bureaus, and Chase and U.S. Bank report seriously delinquent accounts, but credit cards issued by Bank of America, Citibank, BBVA, and Wells Fargo won’t impact your personal credit score.
Here are our top picks for business credit cards that don’t have personal guarantee requirements and that won’t affect your credit score if you become delinquent.
For a Low APR: Chase Ink Business Cash
As we mentioned, Chase won’t report your business card usage to personal credit bureaus unless you’re seriously delinquent. So as long as you borrow responsibly, you’re in the clear. The Chase Ink Business Cash is one of the best low-interest business cards out there, boasting a 0% APR on purchases and transfers for the first 12 months.
Offering more flexibility and potentially a lower overall interest rate than a small business loan, it’s a good card to have when you need to make a large purchase and pay it off over time.
Oh, and it also offers rewards.
The Ink Cash comes with 5% cash back on office supplies and phone, internet, and cable services (up to a combined $25,000 spent annually); 2% cash back on gas and restaurants (up to a combined $25,000 spent annually); and an unlimited 1% cash back elsewhere. To sweeten the deal, it comes with a $300 signup bonus when you spend $3,000 in the first 3 months of cardmembership. With no annual or employee card fees, the Ink Cash is an excellent no-fee card.
For Rewards: Bank of America Cash Rewards MasterCard
The Bank of America Cash Rewards MasterCard offers simplicity and peace of mind: With no annual or employee card fees and straight-up cash back, you don’t have to worry about award travel or costly annual charges. The BofA MasterCard gives 3% cash back on office supplies and gas up to $250,000 spent annually, 2% at restaurants, and an unlimited 1% elsewhere, making it an appealing option if you’re well over the Chase Ink’s $25,000 bonus cap. Additionally, it comes with 0% interest on purchases and transfers for the first 9 months, and a $200 signup bonus if you spend $500 in the first 60 days of account opening.
While business credit cards without personal guarantee requirements are few and far between (and usually out of reach for small or new business owners), you can find plenty that do have good rewards, low interest rates, and minimal impact on your personal credit score.
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from Fundera Ledger https://www.fundera.com/blog/business-credit-cards-without-personal-guarantee