Business Credit Cards Without Personal Guarantees
Are you surprised that in your search for business credit cards, everywhere you look a personal guarantee is required?
Why is it that the majority of lenders, banks and credit card issuers require a personal guarantor?
Bottom line it’s all about minimizing risk.
Let’s look at it from a bank’s perspective. A personal guarantor (also referred to as a co-signor) provides a level of security that in case the business fails to repay; the guarantor (business owner or credit partner) will guarantee repayment. In a way, a personal guarantor is like collateral because the guarantor is the pledged security as opposed to hard assets such as real estate, stocks, bonds, equipment, etc.
Now since a personal guarantee is unsecured, it’s not tied to any form of collateral. So in the event the business defaults the bank will demand repayment from the guarantor and if the guarantor fails to make good on the guarantee, the bank may go after the guarantor’s personal assets.
It’s no surprise that getting business credit without a personal guarantee is on the wish list of many business owners like you. So is it possible? Can you get business credit cards without a PG?
Yes. It is possible, but it’s not easy.
In this post I’m going to cut to the chase and tell you what you need to know not what you want to hear. The truth is getting no PG business credit cards and getting released from the personal guarantee on existing company credit cards is entirely based on convincing the bank that the loss of a personal guarantee does not increase the risk of nonpayment.
So how do you accomplish that?
Here are three ways to get business credit cards with no PG.
How to Get Business Credit Cards Without a PG
1) Get Released from a Personal Guarantee (existing cardholder accounts) – If you currently have a business credit card that you acquired using a PG you can always request removal after you meet certain benchmarks. Remember, it’s all about being able to show the bank that the business itself is financially sound, stable and has an impeccable history of repayment.
First, prior to a PG removal request, make sure all payments have been made on time and both the guarantor and business credit ratings are excellent. Be prepared to make a case as to why the PG is not needed for the account. Some acceptable reasons are high cash reserves and substantial cash flow. (Be prepared to furnish the proof)
Second, keep your credit utilization below 30% prior to submitting a request and avoid carrying any excessive revolving debt. A history of large purchases with timely repayment and low revolving debt shows a bank that the business can manage its finances and has sufficient cash flow to pay back its financial obligations. Once you submit a request the bank will conduct an account review and may check both your personal and business credit reports.
Now don’t be discouraged if the bank says “no”, some banks do not remove guarantors as a matter of policy. They will only agree if a solid case can be made that the business itself is financially stable and proves to be a qualified borrower based on the bank’s standards. Remember, it’s all about showing the bank that the loss of a personal guarantee does not increase the risk of nonpayment.
2) Leverage Existing Banking Relationships – This is a popular strategy we use with our clients. Basically, we get a client’s company 3-5 high limit business credit cards that only report to the business credit agencies (PG is required). This not only gives them access to cash but also establishes a banking relationship with 3-5 of our regional and national bank partners.
After 6-12 months of impeccable payment history with each card the business would then apply for a second round of funding. It would apply for 3-5 business credit cards from the same bank partners but this time with no personal guarantee (No PG). Now keep in mind, it’s all about the business being a good risk. By establishing a strong long standing relationship with a bank partner the better the risk a company is perceived.
3) Meet No Personal Guarantor Requirements – The third and final way to get business credit cards without supplying a PG is meeting the actual requirements of a no PG card. Now there are various types of cards you can get all having different levels of criteria.
For example, you don’t have to supply a personal guarantee for the Sams Club® Business MasterCard® if your business has more than $5 million in annual sales. Like I said earlier, it’s all about risk and a business that has strong revenues definitely meets the no PG requirement.
Another card, the Bremer Bank Visa® Signature Business Company Card is available to established medium- to large-sized companies with annual sales between $1 million and $10 million according to a bank spokeswoman.
Other no PG card requirements with some card issuers are business credit report based. If your company has 10 reporting trade-lines, an open D&B file, and a minimum $10K high limit reporting from another account under your business name it may qualify for several no PG cards listed in our Business Credit Building System.
While business credit cards with no personal guarantee may be on your wish list, don’t let it be the only source of financing your company has access to. The key is having access to a diversity of credit so your company has more choices and more options.
Ready to get no PG business credit? Become a member of my Business Credit Insiders Circle and gain access to a proven step-by-step business credit building system. A system that provides you access to vendor lines of credit, fleet cards, business credit cards with and without a PG, funding sources and lenders that report to all the major business credit bureaus. Submit your name and email below for details and receive a free business credit building audio seminar ($597 value) =>
To Your Success In Business and in Life!
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About the author
Marco Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle. He is a business credit blogger for Dun and Bradstreet Credibility Corp, the SBA.gov Community, About.com and All Business.com. His articles and blog; Business Credit Blogger.com, have been featured in ‘Fox Small Business’,’American Express Small Business’, ‘Business Week’, ‘The Washington Post’, ‘The New York Times’, ‘The San Francisco Tribune’,‘Alltop’, and ‘Entrepreneur Connect’.