Business Lines of Credit Without Personal Guarantee As a small business owner, you will face various challenges to keep your company operational and moving forward. Obtaining financing or additional working capital 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 small business loan or working capital due to a lack of collateral, low personal credit scores, or little to no established business credit score. Access to funds is critical for any unexpected expenses. 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. This option is often with an alternative lender or online lender and not the traditional lender like the bank. One frequent question the small business owners ask us is: How do I get business credit without a personal guarantee requirement? The first step to getting a small business line is understanding 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 it’s business debt or personal debt. Unless you become insolvent and declare bankruptcy, you will 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. Sam’s Club Business Credit Card is an example of a business credit card with no personal guarantee. Another, for those road warriors out there, is the Shell Small Business Credit Card. While American Express only issues a business credit card in the business name, make sure you read the fine print regarding any personal guarantee. How to Get Business Credit Cards With No Personal Guarantee Getting a business credit card without a personal guarantee is possible in two ways. They both rely on your company’s finances and credibility, not the cards themselves. You need to take the 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. Do yourself a favor and pull your business credit report. You can avoid personal guarantees if you have an excellent payment history, strong financial records, and a low debt-to-credit ratio. Your company credit score and on-time payment history may allow the bank to remove you from the personal guarantee requirement. On subsequent funding rounds, a bank may waive the personal guarantee requirement if you already have an established line of credit. In other words, the bank must have faith in your abilities. Remember, this is all about taking a chance. Based on the company’s history, larger and more established enterprises may be able to avoid the personal guarantee. Companies that have been in operation for a particular period and have generated continuous income above $1 million may be exempt from providing a personal guarantee on their business credit cards (or more). Retailers rather than banks frequently provide these cards; hence, your spending ability is limited to specific locations or products. We suggest using any of the credit monitoring services or business credit bureau to periodically check your credit reports and personal credit score from time to time to make sure you’re on the right path. Strategically this makes sense if you want to ultimately qualify for bank loans or even an SBA loan (through the Small Business Administration). What Are The Top Business Credit Cards With No Personal Guarantee If you want a Sam’s Club Business Credit Card, you’ll need to sign up for a Sam’s Club membership (of course). Once you’ve done so, you’ll be eligible for a rewarding loyalty program. There are five percent back on qualified petrol purchases worldwide, three percent back on dining and travel, one percent back at Sam’s Club, and everywhere else Mastercard is accepted if you use this card. With this rewards program, you can earn points on purchases made at retailers other than Sam’s Club. This card has no yearly cost, but you must pay the annual Sam’s Club membership fee ($45 to $100). In addition, Sam’s Club offers a $30 credit on your first day of use if you spend $30 on your card. When it comes to the best credit cards without a personal guarantee, the Shell Small Business Card is one of the best options for road warriors and fleet managers alike. No monthly fees or account setup costs are associated with this card, which is free to apply. It also means that you will not have to pay for the additional cards your workers need. Free unlimited additional cards come with the Shell corporate credit card package. Shell Small Business Cardholders can also receive rebates of up to $0.06 per gallon, but keep in mind that you can only use the card for purchases at a Shell gas station or a participating Jiffy Lube. Business owners in the transportation industry who wish to make it easier for their employees to pay for gas may find this helpful option. Customers of Stripe can apply for the Stripe Corporate Visa Card. Owners don’t have to fill out any additional paperwork or provide personal guarantees to acquire the card. In the words of Stripe, you can “start using a virtual card in minutes.” However, if you sign up for a credit card immediately after opening a Stripe account, you can’t expect to acquire a good line of credit. Your credit limit will increase as your business grows and you create more payment volume basing it on your payment processing history on the platform and your bank history. Ink Business Preferred. After spending $15,000 in the first three months of account opening on purchases, you get bonus points. When redeemed through Chase Ultimate Rewards, you’ll receive $1,000 in cash back or $1,250 in travel credit. Capital One Spark Cash for Business. Business owners find this card is a good option who are looking for basic rewards because of the no-fee first year and the unlimited 2 percent cash back. Capital One Spark Cash Select—0% Intro APR for 12 Months—has no annual fee and may be better value for businesses with minimal expenses if you don’t plan to spend more than $4,750 annually on a credit card. Do all business loans require a personal guarantee? All financial institutions, including banks and your credit union, want to minimize their risk if your business fails. One way to accomplish this is to make sure you are responsible for repaying 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, and they will look at your personal and business credit profiles as part of the loan application process. 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 distinguish between an actual 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 your payment could be smaller if you do not utilize the total amount. Additionally, they are easier to qualify for than traditional loans. Unsecured Business Loans Many business lenders want a personal guarantee on an unsecured business loan, even if no collateral is involved. Even when no physical collateral is necessary, you secure most unsecured loans by a personal guarantee or a UCC claim. The interest rate on this type of loan is typically higher and may need a personal guarantee. Traditional commercial banks (business bank) offer term loans and business lines of credit, but unsecured loans without personal guarantees may be more challenging to obtain. They will provide a traditional business loan with the security or any cash, collateral, or assets. Invoice financing is the most common unsecured line or loan with no personal guarantee. 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, ability to repay, minimum bank balance, or annual sales revenues. Invoice financing allows you to receive a simple cash advance on all or part of an unpaid invoice. The invoice uses the invoice as collateral if you are unable to pay. You can finance outstanding invoices with repayment terms of 24 or 48 weeks. Most lenders charge between 5% and 7% of the total invoice value, resulting in Annual Percentage Rates of 13.44% to 67.70%. This type of financing may be the only actual credit line without personal guarantees extended to the average business. The credit decision is on the company that owes you the money, and if they have a strong credit profile, great! However, you will be out of luck if they have poor credit. Merchant Cash Advances As a percentage of expected sales, a merchant cash advance gives you money as an advance rather than a term loan. As clients pay for goods or services daily, weekly, or monthly, the advance is refunded. There is a hefty interest rate on a business cash advance, like an unsecured loan. Before consenting to a merchant cash advance, understand the repayment terms. When Would I Use a No Personal Guarantee Business Line of Credit? Many businesses go through seasons when their profits are lower than expected, and small business loans can help pay bills and make payroll. 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. 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 determine whether you are responsible for managing your finances. These are not bad credit business loans, and you must meet all of these requirements. Personal credit scores of 700 or higher. Strong Business Credit Scores 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 revenue requirements of over $240,000. Time in Business at least one year Additionally, the lender will want to see proof of your financial stability in a business bank account and business checking account statements, tax returns, balance sheet, 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 action plan is to apply for a business line of credit as soon as you meet the qualifications and can maintain financial responsibility. When the time comes that you need extra cash flow, you won’t have to wait for the completion of the application and approval process. 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. Sunwise Capital Most loans require a personal guarantee. Thus, getting a loan without one is tricky. It’s worth looking into other loan types if you’ve already applied for a Business Lines of Credit Without Personal Guarantee and haven’t been successful. It’s essential to have money on hand for your small business to grow or weather difficult times when cash flow may be limited. Any type of business funding can make a huge difference, whether a modest loan or anything else. 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 like the idea of an open revolving line of credit in case of emergencies, the LOC may make sense. Talk to a small business financing advisor at Sunwise Capital, a top online lender, about applying for a business line of credit and find out if it’s the right choice for you! You can go directly to our online application now.