Business credit cards without personal guarantee are often dreamed come true for small business owners. For most small businesses, it’s tough to get this term on a credit card. A personal guarantee minimizes the risk for creditors lending you money.
Think of it like co-signing a loan with your company. If you co-sign on an apartment lease and the other person doesn’t make rent, you’re responsible for paying. The same goes for your business credit card. If it has your personal guarantee, and your company is not able to pay its debts, you’re personally responsible for paying them.
Business credit cards with no personal guarantee exist if you are able to qualify for one. Such cards demolish or eliminate an owner’s personal liability to repay card debt, but they typically are issued to businesses with at least $1 million to $4 million in annual revenues and one to two years or more of cash reserves.
For businesses that do not meet these high thresholds, a small business credit card that offers low rates and generous rewards is an ideal solution.
A good option is the American Express Blue Business Cash Card. It offers the ability to earn 2% cashback on purchases up to $50,000, and 1% thereafter.
A business credit card with no personal guarantee means you will not be responsible for your business’s debt. In other words, if your business cannot pay liabilities, creditors cannot come after your personal assets. You can think your business structure protects your personal assets from company liabilities.
This is true in some situations.
Only the creditworthy small businesses qualify and receive a pre-approval invitation. Some credit cards like Sam’s Club find a Business account that will waive a personal guarantee if your company has less than $5 million in annual sales or revenues or is less than 2 years old or has fewer than 10 employees.
Now if you are a sole proprietorship or partnership then you automatically disqualify and must provide a personal guarantee for this card. That ought to give you all the more reason to incorporate your business.
Keep in head there are high limit business credit cards that will report only to your business credit reports. After establishing a positive record with these issuers you can apply for the second round of funding without supplying a personal guarantee depending on the issuer.
But let me remind you that regardless of what you have read it takes much more than simply generating a payday score to qualify for these cards let alone be invited to apply.
Suitable For: Companies with 15+ general credit card users.
Annual Cost: $25 – $100 per card.
APR: No APR with an annual spend of $250,000 to $1 million.
Liability: Company, employee or shared liability (Company liability + Employee liability).
Qualification: Company must have $4 – $25+ million in revenue.
Suitable For: Companies with a fleet of two or more vehicles.
Annual Cost: $0 – $25 per card.
Liability: Company or shared liability (Company liability + Employee liability).
Qualification: Company must have over $1 million in revenue.
Suitable For: Bad personal credit or limiting exposure to employee use.
Annual Cost: $0
Qualification: Line of credit secured by cash.
With a small business credit card, a small business owner is responsible or liable for providing a personal guarantee (or promise) that they will pay the amount owed in the event the business or cardholder fails to do so. This guards the credit card issuer but places additional risk on the owner.
Card issuers have the desire to issue business credit cards with no guarantee because they have offset the risk. They do this by restricting cards to large businesses with good business credit and by requiring the card to be paid in full each month.
Corporate credit cards are issued to companies with $4 million or more in revenue and at least 15 card users. Liability may rest solely with the business or it could be held jointly between the business and individual cardholders. Most corporate credit cards must be fully repaid monthly, meaning your business pays no interest.
As a result, you will typically pay higher annual card fees, ranging from $25 to $100 per card, and will be required to spend at least $250,000 to $1 million per year.
Corporate cards issues with either complete corporate liability or combined liability between the company and the employee cardholders. Monthly payment responsibility falls to either the company or the individual cardholders.
Here are the two types of liability for corporate credit cards with no personal guarantees are:
The company is billed for all account charges and is responsible for paying them. When employees are not responsible for paying their individual charges, they do not have to wait to be reimbursed, which can streamline a business’ accounting practices.
(b) Joint corporate and cardholder liability
The employee cardholder typically pays the monthly bill and is then the company pay back his or her money. American Express in this scenario says the employee is responsible for any charges that are personal in nature and which do not benefit the (company) for legitimate business purposes.
While corporate credit cards cover a range of benefits, they may also offer reduced cashback or points rewards compared with the best small business credit cards. The One Card from Capital One, for example, pays 1.5x points on all spending if you choose a 14-day billing cycle or 1.25x points on all spending if you choose a 30-day billing cycle. In comparison, the issuer’s small business credit card, the Capital One Spark Cash for Business offers 2% cashback on all spending.
Businesses that use corporate cards typically have 15 or more cardholders, at least $4 million in annual revenue, and an existing corporate credit card policy agreement. Corporate cards design for businesses that make a minimal of $250,000 to $1,000,000 annually in card transactions.
Corporate credit cards seem best for you if you need the cards to pay for travel and entertainment expenses. Some cards provide built-in expense management systems, which is a nice feature if your business has many people who incur travel and entertainment expenditures. Such cards also may offer:
Major issuers like American Express, Capital One, Chase and Citibank all offer one or more corporate credit cards. American Express provides six different corporate card options, including cards designed for frequent business travelers and corporate purchasing agents.
When the requirements for approval are high, card issuers like American Express require you to call or chat live with a team member prior to approval. At the time of the application process, you will need to provide the following:
If your company does not have enough revenue to qualify for a corporate credit card, Brex is a good alternative. The start-up provides business credit cards with no personal guarantee to early-stage technology companies. Approval and credit limits are entirely depending upon your bank account balance ($100,000 minimum).
Companies or businesses that qualify for a gas card without a personal guarantee typically have $1 million or more in annual revenue. Such as corporate credit card, a gas business credit card with no personal guarantee can either have company-only liability or card-specific liability. This means liability is either fully on the business or shared with the individual cardholder.
Corporate gas cards come in the form of either fuel cards or fleet cards, some of which do not require a personal guarantee. Fuel cards typically are for businesses with no more than two vehicles, while a fleet card is used by businesses with two or more vehicles.
It is not uncommon to find gas cards that require a personal guarantee. In these cases, liability is jointly between the business owner and the business. Employees are not responsible for transactions on their cards when a personal guarantee is needed. Small business gas cards might charge APRs as high as 25%, while most fleet cards charge APRs of between 15% and 20%.
Small business gas cards do not charge a monthly fee, although you need to pay an annual fee of $25 to $99. Fleet cards, meanwhile, may charge monthly up to $10. Issuers may waive fees if your company meets a monthly gallon threshold.
To meet the requirements for a business gas card with no personal guarantee, the owner will need to have at least fair credit, with many issuers requiring a personal credit score of 650 or higher. Fuel cards are ideal for businesses that use no more than two vehicles regularly.
Fleet cards are best for businesses that run two or more vehicles and use between 1,000 and 5,000 gallons of gas per month on average.
Some small business gas cards are used to make purchases other than gas or maintenance, but fleet cards restrict payments to gas purchases, vehicle repairs and maintenance at participating businesses.
Gas cards might provide you discounts of as much as 4 cents per gallon, while fleet cards give users a discount of as much as 10 cents per gallon. Fleet cards can also provide discounts of between 10% and 15% off the purchase of tires, general maintenance, or vehicle repairs.
How to attain a Business Gas Card with No Personal Guarantee
Corporate gas cards are co-branded with a card issuer and a fuel company. For instance, Shell has a co-branded a small business gas card with Visa. In fact, Shell is one of the best small business fuel cards and is one of the few corporate gas cards that offer the possibility of no personal guarantee.
Firms in business for at least three years and with a minimal $1 million in annual revenue may qualify for a Shell business card without a personal guarantee. Businesses that do not meet these minimums can qualify but will be subject to a personal guarantee.
The Shell Small Business Gas Card has no monthly cost and provide a $0.03 discount per gallon. The card can be used at over 14,000 participating gas stations.
These Business credit cards are backed by a business owner’s cash and there is, therefore, no liability or personal guarantee. Prepaid cards are best for maintaining fiscal discipline or if you are unsure whether you would qualify for a credit card. If you need two or fewer cards, you will typically pay no monthly fee; otherwise, you may pay $25 or more per month.
With cash, you can purchase a prepaid card. Once the cash is used, the card can no longer be used unless it is reloaded. Because of this, there is no risk to the card issuer, and so the business owner will not need to provide a personal guarantee and your credit will not be checked.
Prepaid cards work on the same card networks as credit cards, including American Express, Mastercard and Visa, which means you will be able to use them in all the same places you would use a credit card. But you will not be able to earn cash or points like with a small business credit card, as prepaid business credit cards do not offer introductory or ongoing rewards.
Prepaid credit cards do not help you build business credit the way unsecured and secured business credit cards do. They mitigate a business owner’s risk because employees can only spend the funds available on the card, which can offer protection against theft.
A prepaid card may be the right business credit card with no personal guarantee if you want to:
Prepaid business credit cards with no personal guarantee are available for online application. To get a prepaid credit card without a personal guarantee, you will have to enroll in one of the online programs.
If you want a prepaid business credit card that does not require a personal credit check or personal guarantee, Bento for Business is a solid pick. With Bento, you control where your employees spend their money, how much they spend and when they can spend it. You can issue cards to all of your employees and track their expenses in real-time.
If you cannot qualify for a business credit card with no personal guarantee, there are plenty of good small business cards to choose from. You will be liable for repayment, but these cards are still a great way to separate business and personal expenses, establish business credit, track business charges and earn rewards.
2. Small Business Secured Credit Card
Just like a prepaid small business credit card, a secured credit card is a credit card. Your available credit is equal or the same as the amount of cash collateral you have on deposit. The business secured credit card otherwise acts just like a regular small business credit card. You have to make monthly payments and you will be charged interest on any outstanding balances.
A secured credit card is designed mainly for business owners with little credit. Secured credit cards are using to both make personal credit as well as business credit. You may be able to earn cashback rewards and pay no annual fee. The cardholder is personally liable for any outstanding debts. The card offers credit lines up to $25,000 and up to 10 employee cards.
A small business charge card is similar to a credit card except that its balance is paid off in full at the end of every month. This is different in that there are no roll-overs and no APR charged on outstanding balances. Instead, business owners need to sign a personal guarantee to settle their company debts at the close of each billing cycle. This means that a charge card does not have a revolving line of credit.
Instead, late fees and restrictions are important on any late payments. The size of the line of credit is dependent on a borrower’s ability to repay.
American Express is one of the few companies that issue charge cards. You generally must have a credit score of over 750 in order to qualify. Charge cards can offer significant rewards and benefits, similar to what small business credit cards offer. They also may charge annual fees of several hundred dollars or more.
A small business credit card without a personal guarantee regulates a business owner’s liability, but other than corporate credit cards, prepaid cards like those offered by Bento and some fleet cards, all small business credit cards demand a personal guarantee.
If you are thinking about trying out a small business credit card with a personal guarantee, check out the American Express Blue Business Cash Card. It provides competitive rates, 2% cashback and you can get employee cards at no additional cost.