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Can you get a business credit card with no personal guarantee?

minute read

    One of the decisions you may make when starting a business is to get a business credit card. You may, however, be hesitant about providing a personal guarantee when applying for one. While many cards require it, there are some business credit cards where this isn't required.

    What is a personal guarantee?

    A personal guarantee is a legal promise in business loan agreements that makes owners personally responsible for debts in case of default. Lenders usually require this for their own protection, especially if they have concerns about the credit history, financial stability or age of a business.

    There are two types of personal guarantees — limited or unlimited.

    • Limited personal guarantee: There is a set dollar amount that limits how much a lender can collect from you personally if you default on your debt. You may find this is more common among companies with multiple owners or business partners.
    • Unlimited personal guarantee: This allows the lender to recover the entire loan amount, in addition to any interest and fees. Under such an agreement, lenders seeking repayment may have access to all of your accounts, and possibly even some assets like your car or home.

    While a personal guarantee may offer a good way to get the funds needed for your business, it's important to be aware of the risks.

    Business credit cards with no personal guarantee

    Many business credit cards require personal guarantees, but you can find some that don't. These cards may come with other stipulations or requirements instead. For instance, some don't allow you to carry a balance and your total charges are debited directly from your bank account automatically.

    Other business credit cards with no personal guarantees typically require a business to be at least two years old with several million dollars in annual sales or revenue. Generally, businesses with significant revenue and high cash reserves tend to find it a bit easier to qualify for a credit card with no personal guarantee.

    The documentation required to apply for a small business credit card with no personal guarantee varies, but often requires information such as a business license, credit history and income tax returns.

    Pros and cons of having no personal guarantee

    When choosing a business credit card for your small business with no personal guarantee, there are a few pros and cons you may want to consider.

    For many business owners who decide to forgo a personal guarantee, the driving factor is the desire to reduce personal risk. Owning a business can be unpredictable, and personal guarantees can put you at risk of personal bankruptcy if your business were to struggle or go under.

    A few cons to seeking a small business credit card with no personal guarantee may include fewer rewards and benefits, lower credit limits and the inability to carry a balance from month to month. Of course, these factors are all dependent on which credit card you decide to go with.

    In summary

    Choosing a business credit card is a highly personal choice that depends on a multitude of factors. When it comes to choosing between a business credit card with no personal guarantee or one with a personal guarantee, you'll have to decide based on what's most important to you. If you prefer to minimize personal risk over anything else and protect your savings and assets, then you may decide a card with no personal guarantee is right for you. If you'd rather be personally liable for your business debt to have a higher limit and more reward options, then you may want a card with a personal guarantee.