Business credit cards are valuable tools for managing company purchases, and you can come out ahead with the wide variety of rewards and perks many of these accounts offer. However, most business credit cards require a personal guarantee as a condition for opening the account, which makes you responsible for all payments and any resulting debt. If that prospect makes you uneasy, you may consider a business credit card without a personal guarantee. Your options will be far more limited and the qualifications stringent, but a few do exist.
Here’s what you need to know about personal guarantees and the best business credit cards currently available that do not require them.
Why business credit card issuers require personal guarantees
Like all lenders, credit card issuers want to mitigate risk. A personal guarantee provides a measure of assurance to the issuer that the account holder will handle the account as per the agreement. The guarantee acts as a type of insurance policy. If you fall behind on payments and default on the debt, the credit card issuer can attempt to collect the debt.
How to minimize personal liability with a business credit card
In the event of default, the amount of money you would be responsible for depends mainly on the type of personal liability clause:
- Limited liability: The issuer can collect on a set dollar limit.
- Unlimited liability: The issuer can collect on the entire amount due, plus financing and legal fees.
Outside of avoiding accounts with personal guarantees, you can minimize the amount you would be responsible for by staying in control of your account. Pay your bills on time and in full. Stop charging when you can’t meet the entire amount due or the minimum requested payment. You can avoid surprises by checking your balance frequently.
If your employees have cards connected to the account, review their charges. Many issuers allow primary cardholders to set lower charging limits on employee cards, so take advantage of that feature if it’s available.
Qualifying for business credit lines with no personal guarantee
In lieu of a personal guarantee, the business card issuer may protect its interests in other ways. For example, you may have to open a deposit account with the bank and keep it well funded. Although not technically a security deposit, the cash in the account underwrites the line of credit.
Or you may have to demonstrate that your business is profitable, with an especially high monthly or annual revenue stream.
A corporate card is another option. Corporate cards generally don’t require personal guarantees because they are issued to a company rather than to an individual. As such, they are not developed for the small business owner who might be an individual or a sole proprietor, but for incorporated businesses, such as an LLC or a corporation.
Best no personal guarantee business credit cards
Here are the best no personal guarantee business credit cards that are currently available:
SVB Innovators Card: Good for fast-growing companies
Silicon Valley Bank has developed the SVB Innovators Card with the early-stage company in mind. In addition to not requiring a personal guarantee, there’s no annual fee or charge for cards you want to distribute to your employees. It is a charge card and not a credit card, so you will have to pay in full by the due date, and there is no APR because you won’t be revolving any debt. It comes with a business credit card rewards program in which you earn 2 points for every dollar you spend, and you can redeem the points for statement credits, purchasing gift cards and products and booking travel.
To qualify for the SVB Innovators Card, you need a business banking account at SVB. The funds you hold in the account will dictate the limit of your credit line. Although it’s not a secured card, your assets are a factor in both approval and the amount you can charge.
Brex Corporate Card: Good for business owners seeking significant rewards
Not only does the Brex Corporate Card not demand a personal guarantee, but it also comes with an outstanding rewards program. Cardholders earn 8X points on rideshare, 5X points on Brex travel, 4X points on restaurants, 3X points on recurring software and 1X points on everything else. It’s a charge card, so you can’t revolve balances, and there are no interest or fees. The card is paid daily from your Brex Cash account balance.
To obtain the card, you have to open a Brex Cash account, and your card’s limit will be up to the amount you hold in that account. The Brex Corporate Card is not available to sole proprietors or unincorporated partnerships, but outside of that, your company can be any size with any number of employees.
Sam’s Club Business Mastercard: Good for business owners interested in earning cash back with no annual fee
The Sam’s Club Business Mastercard is worth a look if you want to earn cash rewards on purchases. You will earn a $30 statement credit upon opening the account. It offers 5 percent cash back on eligible gas purchases (up to $6,000 in purchases per year, then 1 percent), 3 percent on Sam’s Club purchases for Plus members and dining, and 1 percent on all other purchases, with no annual fee. You do need to become a Sam’s Club member to apply. Because it’s a Mastercard, you can use this card to earn rewards virtually anywhere.
You must incorporate your business to qualify for the Sam’s Club Mastercard without the personal guarantee. You will need to demonstrate that your company has at least $5 million in annual sales revenues, has been operating for more than two years and has 10 or more employees.
Office Depot OfficeMax Business Credit Card: Good for business owners who need to carry a balance
With the Office Depot OfficeMax Business Credit Card, you’ll get $50 off your first purchase of $150 or more, applied as a statement credit. If you link your Office Depot rewards membership to the account, you will receive 2 percent back on everything you charge. Since it’s a credit card and not a charge card, you can revolve balances, which can help when cash is tight and paying over time is necessary. There is no annual fee and the APR is 23.99 percent variable.
Your business must be a corporation with over $5 million in annual sales and have been in business for at least three years to qualify for the account without a personal guarantee.
Are business credit cards with no personal guarantee worth it?
When comparing business credit cards, no personal guarantee options may be attractive if you don’t want to be in the position where you would be personally liable for business debt. While the credit card company may be able to sue your business for unpaid credit card debt, your personal assets would be kept separate and protected.
There are several downsides, though. They are typically unavailable to sole proprietors, and meeting the additional requirements can be challenging. Additionally, fewer cards are available without a personal guarantee, and they might have fewer perks and rewards than you deserve.