Published By Janet Gershen-Siegel at March 15, 2018
Do you know how to get business credit cards with no personal guarantee? We do, and we are here to show you how.
Normally, getting credit isn’t easy.
You know what I’m talking about. You looked around the big banks, and then the medium-sized banks and then the small ones. You tried the banks where you do business and the others suggested by your friends or business associates. But after your long quest, you were unable to acquire any kind of a small business credit card without a personal guarantee.
There are over 500 distinct business credit cards around but less than fifty of them grant credit to companies in the absence of a personal guarantee. Complicating matters, these cards are not marketed or granted to all interested clients.
You can identify with the banks’ viewpoint. They don’t like risk so they attempt to diminish it by securing a business credit card. They accomplish this by asking you, the business owner, to guarantee payments from your private finances, in the event of business default. If worst comes to worst, and as a guarantor or co-signer you are not able to pay the financial obligation, then your individual assets will be executed. As in, your accounts, your vehicle, your residential property, your stocks, and whatever else you may have used to guarantee that card.
But your standpoint, of course, is that you need to have this card to run your company better.
The first thing you can do, and it’s easier said than done, is to have patience, and grow creditworthiness for your small business in the same manner that you have established your personal credit history. For most companies, this means paying your debts punctually, plus staying in business for a while, to develop a record of creditworthiness.
In order to get rid of the sticking point of a personal guarantee, you will have to demonstrate to the bank that your small business is solid, that it can produce consistent earnings, it has a substantial cash flow, and the business has a flawless payment history. If all the above can be shown, it will be a lot easier to find a small business credit card without a personal guarantee.
Set apart yourself from your company. This means you can help your cause by incorporating or becoming a limited liability company (LLC). This is a separate entity from the owner(s) and it means you must register for a separate identification number with Internal Revenue Service. If your business is already an LLC you can skip this step altogether.
Get several company credit cards with personal guarantees. The ones with high spending limits will be better for they are the only ones reported to the business credit agencies. Ensure when you obtain these products, they have the personal guarantee removal feature baked right in. Keep your credit utilization at one third of your credit limit or less. Pay in a timely manner every time.
Make sure to use these small business credit cards to make your business’s large orders. These purchases, in combination with a low revolving debt and of course on time payment will demonstrate to the bank that your company can control its financial resources well. It will also persuasively show that the profit your business yields is enough to take care of financial obligations and more.
Make certain that your private credit history stays spotless. Eventually (six months– to one year), you can file a personal guarantee removal request for these preexisting business credit cards. The financial institution will hold an account review, but they could also consider your private credit report. If the bank approves your request then you have accomplished your goal. If the bank says no, don’t lose hope; just go to the next step.
You can elect to make an application for third-party guaranteed lending. For example, this could be an SBA loan, for financing. Settling such a loan will help you develop your business credit score. You can also make an application for a small business credit card from a particular retailer. These store credit cards frequently do not require a personal guarantee. Chose a store where your company makes purchases often and by all means do not forget about those prompt payments! These store credit cards, along with an SBA loan will raise your PAYDEX score provided by Dun and Bradstreet. If you are unfamiliar with the term, the quick version is that PAYDEX is for businesses what FICO is for individuals. Store credit cards will furnish you from the beginning an extra advantage; they will decrease your personal liability for your company debt.
Ask the financial institution again to take off the personal guarantee clause or apply for new business credit cards without any personal guarantee, once you have attained an 80 PAYDEX score under the above conditions. Your opportunity to get such credit cards will increase exponentially.
You can instead apply directly for those very few small business credit cards with no personal guarantees. For example you can opt for Sam’s Club® Business MasterCard® or the Bremer Bank Visa® Signature Business Company Card.
Each specific card of this type asks you, the business owner, to satisfy a set of conditions which differ from one card to another. For a Sam’s Club ® Business MasterCard ® you need your business to bring in over $5 million in yearly sales. The Bremer Bank Visa ® Signature Business Company Card is provided for businesses with annual revenues between $1 million and $10 million while at the same time other company credit cards with no personal guarantee attached call for an open Dun & Bradstreet file and other requirements to be met. Be sure to consult the card issuer and read through all the specifics of the promotion carefully.
With patience and over time, you can get a company credit card from a bank without any personal guarantee. All you need to have is what the banks ask: a dependable small business generating consistent profit, with a strong cash flow.