Getting a business credit card with no personal guarantee

If you’ve been in the market for a business credit card, you’ve probably noticed a term often used: personal guarantee. A personal guarantee provides business credit card issuers assurance that they’ll get their money back regardless of what happens with the business.

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But what if you don’t want to put your financial stability on the line to access capital for your business? Learn more about personal guarantee business credit cards and how to access business credit with no personal guarantee below.

What does “no personal guarantee” mean for a business credit card?

A personal guarantee is exactly what it sounds like. It’s a guarantee by the business owner that they’ll pay their debt back out of their pocket if the business can’t afford to do so. If you're a new business owner, this can sometimes be the only way to get your business credit established. This is because when you open a business credit card with no personal guarantee, the credit card issuer underwrites the loan based just on your business data.

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By contrast, business credit cards with personal guarantees are underwritten based on a mix of your business data and your personal credit. What this means is if your company is unable to pay the bill, this personal guarantee gives the lender the right to start the collection process on you as the business owner. This could include everything from annoying phone calls to a detrimental impact on your personal credit.

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In extreme cases, a lawsuit can be brought against you as well, resulting in losing personal assets such as your home if things go wrong.

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Although you never want to think about your business becoming insolvent, it’s important to consider what could happen when your personal financial stability is on the line.

How to get a company credit card with no personal guarantee

If you don’t want to put your personal financial stability on the line for a business credit card, there are options that don’t require a personal guarantee. However, some of these credit cards are notoriously hard for new business owners to access, so this isn't a guarantee that you'll be able to do this successfully.

General requirements

Lenders that offer business credit cards with no personal guarantee typically require you to have:

• A well-established business: Your business will likely need articles of incorporation that show it has been operational for a minimum of three years.
• Established business credit: Your business will likely need some form of positive credit history—like a history of responsible use of a business credit card with a personal guarantee or a business loan that has a proven history of on-time payments.
• Deposit account: You may be required to open a deposit account and maintain a minimum balance with the lender. A deposit account is typically linked to the credit card, acting as a safety net for the lender, much like a personal credit card with a security deposit.
• Significant revenue and profitability: You’ll typically need to be able to prove that your business generates at least $100,000 in annual profits if not more depending on the nature of the business.

Consider corporate cards

Corporate cards work just like credit cards, but they don’t usually require a personal guarantee because they require a higher revenue threshold to be approved. You may be able to get approved even if you operate a relatively new business because some card providers offer sales-based underwriting to determine your revenue and profitability instead of requiring multiple years of financial documents.

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If you have multiple employees, you should consider corporate cards over business credit cards. They usually offer wider benefits like multiple spending cards, spend management features, real-time tracking, and more.

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Another benefit of corporate cards is that they don’t accrue interest monthly like credit cards. Instead, you pay balances off monthly, avoiding interest and late payment fees altogether.

How to choose the right card

If you’re looking for a new credit card for your business to help build business credit, it’s important to compare your options carefully. Your financial accounts can either make your life easier or much harder depending on how you implement them into your financial plan. Consider the following as you compare your options.

1. Look for rewards and perks that can help your business

As you shop your options, you may get drawn in by airline rewards or other various rewards programs. However, these aren’t the best for most businesses, as these cards are usually more directed at individuals and not businesses. These programs are also usually difficult to navigate and result in less value for the business.

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Look for additional perks that can help your business. You might be able to negotiate discounts on essential business software or identify new cashback rewards programs. For example, Ramp offers 1.5% unlimited cashback on all purchases.

2. Compare interest, fees, and liabilities

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Like many personal credit cards, small business credit cards typically come with a long list of fees, including:

• Interest
• Annual fees
• Foreign transaction fees
• Over-limit fees
• Late payment fees
• Balance transfer fees
• Cash advance fees

It’s important to get a detailed understanding of all the fees associated with each of your options charges and choose a card that helps you minimize costs. Consider the liabilities associated with account ownership, like a potential requirement to open a deposit account with the issuer and maintain a minimum balance.

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If you find that the hassle is too much, have a hard time getting approved, or want to avoid interest and fees entirely, you may want to consider a corporate card where you pay off your balance monthly.

3. Consider credit limits

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As of 2020, the average small business credit card credit limit in the United States is $56,100. However, your credit limit may be significantly higher or lower than average. This could be due to multiple things, including:

• Credit history: The more established your business credit is, the higher the credit limit you’ll qualify for. For example, a business with 10 years of on-time payments will likely be able to access more capital than a business with 3 years of on-time payments.
• Revenue and profitability: Lenders ultimately want to know that your business has the ability to pay back the money they lend. The more revenue and profitability your company generates, the more money lenders are willing to offer.
• Credit utilization rate: Your business’s credit utilization rate is the percentage of available credit it has already used. When your credit utilization rate is too high, it’s a red flag to lenders. If you keep your credit utilization rate below 30%, lenders are more likely to offer a higher credit limit.
• The lender: Some lenders are known for offering higher credit limits than others. If you have a working relationship with one lender, they are usually more willing to offer you higher limits
• Underwriting style: If you use e-commerce platforms like Shopify, Stripe, or Amazon, you should strongly consider looking for a card provider like Ramp that uses sales-based underwriting. This typically leads to much higher credit limits—up to 30x higher than traditional offerings in some cases.

4. Look for spend management software

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When you look for a business credit card, you should look for something more than a traditional credit card. In particular, look for modern options that come with spend management software.

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Cards like Ramp give you complete control over your company’s spending with features like:

• Unlimited employee cards with custom spending limits at the card and transaction level
• Approval workflows that automatically trigger when your employees request a card
• Advanced spend controls like merchant and category restrictions to help you implement your expense policy
• Real-time expense tracking and automated savings insights to help you cut down on redundant software, duplicate subscriptions, and more
• Automatic receipt collection and integration with your accounting software to save time at month-end
• Access to bill pay and reimbursement capabilities so you can track all of your non-payroll spending in one place‍

Access the capital your business needs with Ramp

If you need access to a spending card for your business, Ramp is what you’re looking for. Our card comes with a wide range of spend management features, 1.5% unlimited cashback on all purchases, and integrations with platforms like QuickBooks, NetSuite, and Sage Intacct for better accounting.

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Want to learn how Ramp can help you achieve your business goals? Find out here.

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