Many large credit card providers don’t require a personal guarantee when you apply for a business credit card.
What is a personal guarantee?
A personal guarantee is a legal promise made by a business owner or an organisation to accept the responsibility to repay the credit issued to their business in case it fails to pay its debt.
For a small corporation or a limited liability company that doesn’t have a credit history, the manager or stockholders typically personally guarantee that they’ll pay the debt in case the company goes bankrupt.
Do business credit cards have a personal guarantee?
Some (but not all) business credit cards will require you to sign a personal guarantee to get approved for a card. However, this will normally be the case if your small business or startup has limited credit history.
Does a personal guarantee affect credit?
No, a personal guarantee will not generally appear on your credit file, and will have no impact on your credit score, provided you continue to use and pay off your card correctly.
If you fall behind in payments or default on the card, this is likely to appear on your credit file and may affect your chances of getting another loan or credit card in future.
Can I get a credit card without a personal guarantee?
While it can be difficult to find a business credit card with no personal guarantee, it’s still possible to do so. We contacted American Express and Barclaycard, and both confirmed that there is no need for customers to sign a personal guarantee when applying for a business credit card.
If you’ve just started your business and you’re not entirely sure how it’ll go, your personal assets and financial future could be at risk. A card without a personal guarantee helps ensure that your personal finances will be secure even if your business fails.
How to choose the right business credit card with no personal guarantee
Work out what you need from a credit card. Do you want 0% on purchases, the ability to earn cashback and rewards, or a high credit limit?
Compare the market to find the right card. Some banks like Barclays don’t require customers to sign a personal guarantee. You could approach other lenders to enquire about their stance on this.
Pick the card you want to apply for. Make sure it meets all your criteria.
Negotiate. If you’ve been a long-time customer with your bank, you may be able to negotiate a card without a personal guarantee. Your chances are improved significantly if you have an excellent payment history, great business financials and low debt. Some banks may waive the personal guarantee after you’ve had the card for a few years or if you’ve built up your business credit score.
Make sure you meet the requirements. Another way is to meet the bank’s size and revenue requirements. Often times you can get past the personal guarantee if your business has a big enough revenue or a minimum amount of employees.
Credit card jargon explained
APR. The annual percentage rate (APR) is designed to be a benchmark for consumers, providing an annual summary of the cost of your card. As well as the interest, the APR also takes into account any compulsory charges – like an account fee (if there is one). However, crucially, providers only have to award the advertised APR to 51% of those who take out the credit card – the other 49% could be offered a different (higher) rate, at the provider’s discretion. That’s why it’s often referred to as the representative APR.
Personal guarantee. This is a document you may need to sign that makes you personally liable for any debt incurred by your company when applying for a business credit card.
Purchase rate. This is the percentage rate you’ll be charged on all purchases made using your card if you fail to pay off your balance before the end of your interest-free period. It can be either a fixed or variable rate, which means it either stays the same, or changes over time.
How to manage your business credit card
Control your spending. In times of slow sales, it may be tempting to overspend on your credit card to counteract this. However, once you’re unable to pay off your balance in full and interest payments begin to mount, it’s common to fall into a debt cycle that you can’t get out of.
Always pay in full. Try not to carry your balance from month to month. That way, you’ll have less pressure and you won’t be held liable for unpaid balances.
Limit authorised users. Since you’re liable for your business account, make sure to set up spending limits for your employees and authorised users, so you don’t get stuck with a higher balance than you can afford to repay.
Bottom line
It’s difficult to find the perfect business credit card without a personal guarantee. In many cases, you’ll have to meet certain criteria and will often be limited to using the card on the issuer’s products or services.
Frequently asked questions
Most business credit card providers allow you to apply online or over the phone. You’ll need to provide identification, proof of ownership and financial details for you and your business.
Potentially. There are various lenders that specialise in offering loans and credit cards to businesses with bad credit. However, you’ll be less likely to find a card with no personal guarantee if you have a poor credit score.
Some lenders will check your personal credit score as well as your business credit score when assessing your application. This is particularly common if you have a new business with a short financial history.
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Chris Lilly is Head of publishing at finder.com. He's a specialist in personal finance, from day-to-day banking to investing to borrowing, and is passionate about helping UK consumers make informed decisions about their money. In his spare time Chris likes forcing his kids to exercise more. See full bio
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