When to Choose a No Personal Guarantee Business Line of Credit

Sunwise Capital No Personal Guarantee Business Line of Credit

As a small business owner, you will face a variety of challenges to keep your company operational and consistently moving forward. Obtaining financing and simultaneously building corporate credit to supplement profits or drive growth shouldn’t be one of those challenges.

Unfortunately, many business owners struggle to get a traditional bank loan or working capital due to a lack of collateral, low personal credit scores, or little to no established business credit score. Thankfully, there are fantastic financing options available to gain access to cash if you know how to find a no personal guarantee business line of credit. Many times this is with an alternative lender or online lender and not the traditional lender like the bank.

One frequent question the small business owners asks us is:

How do I get business credit without a personal guarantee requirement?

The first step is to understand what a “personal guarantee” really means. The “PG” as it’s commonly called, means that you are responsible for and will pay off the credit card debt (or else). It does not matter if its business debt or personal debt. Unless you become insolvent and declare bankruptcy, you are going to pay it off.

Even if you are a co-signer or the debt is in the company’s name, you are responsible financially in the event of a default. You can be accountable if it is a business credit line, like business credit cards or even an unsecured business loan or merchant cash advance.

An example of a business credit card with no personal guarantee is Sam’s Club Business Credit Card. Another, for those road warriors out there, is the Shell Small Business Credit Card. While American Express issues a business credit card in the business name only, make sure you read the fine print regarding any personal guarantee.

Gaining access to credit with no personal guarantee is possible. However, it is challenging. You need to take time and have the patience to find the best financing solutions. You must make sure you have strong personal credit scores and business credit scores.

We suggest using any of the credit monitoring services to periodically check your credit reports from time to time to make sure you’re on the right path. Strategically this makes sense if you are looking to ultimately qualify for bank loans or even an SBA loan (through the Small Business Administration).

Do all business loans require a personal guarantee?

All financial institutions, including banks and your credit union, want to minimize their risk in the event your business fails. One way to accomplish this is to make sure you are responsible for the repayment of any extension of credit. You will find that your loan options are limited to a secured loan (or personal loan).

This accountability is why your personal credit score is essential. Lenders will rely on credit bureaus to help in the decision-making process. They will look at both your personal and business credit profiles as part of the loan application process. That is why building your business credit is an essential step in getting business funding.

What is a No Personal Guarantee Business Line of Credit?

First, we need to the differences between a true no PG business line of credit and an unsecured business line of credit when distinguishing between these two financing options. An unsecured business line of credit means that you are not using collateral or assets to “secure” or guarantee the loan. The distinction here is that while it’s a line of credit, it does not mean that there is no personal guarantee.

A no personal guarantee business line of credit is a form of revolving credit that does not require you to provide collateral to qualify. The lines of credit (LOC) are flexible and low maintenance, with the option to use them as needed, or not use them at all.

Your payments reflect the amount of credit you use, so if you do not utilize the full amount, your payment could be smaller. Additionally, they are easier to qualify for than traditional loans.

The most common type of unsecured line or loan with no personal guarantee is invoice financing. Invoice factoring allows your business to gain access to the equivalent of a bank line of credit. The advantage of invoice financing is that it’s not dependent on your personal credit or ability to repay. This type of financing may be the only actual credit line without personal guarantees extended to the average business.

When Would I Use a No Personal Guarantee Business Line of Credit?

Many businesses go through seasons when their profits are lower than expected. Small business loans can be used to help pay bills and make payroll during this time. New businesses may find themselves in a similar situation or need extra cash flow for promotions, expansions, or building inventory.

A significant advantage of using a no personal guarantee business line of credit is that you can qualify without impacting personal credit or risking personal assets, and you can use it to build company credit. Regular on-time payments to a business line of credit will help establish good credit standing for your business, which will help increase buying power and lending opportunities in the future.

What Do I Need to Qualify for a Business Line of Credit?

To qualify for a no personal guarantee business line of credit, the lender will need to do a soft pull credit check. The soft credit pull will not impact your credit score, but there are criteria they will be looking for to help them determine whether you are responsible when it comes to managing your finances. These are not bad credit business loans. You must meet all of these requirements.

  • A credit score of 700 or higher.
  • Good credit history from a personal credit card that is two or more years old and/or a mortgage that is three or more years old.
  • Credit card usage or utilization should be 30% or less.
  • No open bankruptcies, liens, or collections.
  • No late payments within the previous 12 months.
  • No more than four credit inquiries in the last 12 months.
  • No charge-offs that are less than two years old.
  • Some lenders will require annual revenues of over $240,000.

Additionally, the lender will want to see proof of your financial stability in the form of a business bank account and business checking account statements, tax returns, balance sheet, and profit, and loss statements. They will also need information about your business. The information includes your industry, how long you have been operating, the owners, cash flow, and average daily business bank balances.

How Soon Do I Need to Apply?

The best plan of action is to apply for a business line of credit as soon as you meet the qualifications and can maintain financial responsibility. That way, when the time comes that you need extra cash flow, you won’t have to wait for the application and approval process to be completed.

However, some lenders, like Sunwise Capital, can help you get approved in 24-hours or less, and provide funding in as little as a day or two depending on the loan amount. Fast business loans or a business cash advance are available upon request.

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A no personal guarantee business line of credit is an excellent option if you do not want to risk your personal assets. If you are looking to build credit for your business, or if you like the idea of an open revolving line of credit in case of emergencies, the LOC may make sense.

Talk to a small business financial advisor at Sunwise Capital about applying for a business line of credit and find out if it’s the right choice for you! You can also check out the other great lending and financing options available from Sunwise Capital, like an equipment loan or short term loan, all designed to help your business succeed – especially when you need cash.


Mark J. Kane is a successful entrepreneur and small business owner. He spent 17 years in the investment banking industry. As CEO of Sunwise Capital, he understands the challenges of building a business through equity, debt, and off-balance sheet financing.

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