Owner Of Gift Shop Standing In Doorway

How to Obtain a Business Credit Card With No Personal Guarantee

Want a business credit card but don’t want to give a personal guarantee? We look at how…

“Runway” is a critical concept from the startup world that has practical applications for all small business owners. The idea is that, just like an airplane, your company needs to lay down a certain amount of liquid capital to make enough space for your business to get off the ground. Business credit cards are essential to pave this runway, giving you access to immediate cash flow to improve your business quickly.

However, it is not good practice to mingle business and personal finances. You want to obtain business credit based on the financial standing of your business instead of your own credit score. Most banks want a personal guarantee because it’s safer for them, but what is safe for them may not be the best thing for your business or your personal credit standing. Although it is possible to obtain a credit card for your business without a personal guarantee, it’s not easy. Here’s a brief introduction to obtaining business credit without exposing yourself to unnecessary risk.

Three Requirements

The actual conditions will vary based on the institution where you are applying, but there are three typical requirements:

  • Your business must be a corporation or a LLC. If you are running a sole proprietorship or a partnership, business loans are essentially personal loans, so a personal guarantee is required, but you may need a co-signer.
  • Successful business operations for more than two years. Some banks have recently introduced a new “no-guarantee” business credit card for companies that can document at least two straight years with profits exceeding $350,000 on annual revenues of between $1 and $10 million.
  • A history of established business credit lines using instruments that reports to Dun & Bradstreet. Try to make sure your Paydex score is 80 or above to qualify as a low risk and secure better loan terms. Some major national suppliers who don’t report to Paydex also have the ability to extend you a line of credit without a personal guarantee. Remaining in good standing with these suppliers improves your financial strength on paper when you go for a business loan.

Personal Credit Issues

In some cases, you may not want to apply for a card with a personal guarantee because your credit score may not be high enough to secure it. Obtaining a business credit card under those conditions is more challenging, but not impossible.

Here are three actions you can take right now to start correcting the situation:

Don’t accept the popular wisdom that you need good credit to get good credit. There are plenty of organizations and businesses that can benefit from the success of your business. Concentrate on your sales in the short term to expand your possibilities for more types of credit and better terms. This is the best way to extend your runway for a smooth take off in the near future.