There are a handful of business credit cards that don’t require personal guarantees, but they tend to have stringent requirements. For instance, you may not qualify under certain business structures and if your company’s revenue and sales figures aren’t high enough.
Dear Your Business Credit,I’d like to get a business credit card for my startup but don’t want to give a personal guarantee. Are there any options out there for me? – Jason
In the years since I’ve been writing this column, your question is one of the most popular. The short answer is it is very difficult to get business credit for a startup with no personal guarantee.
Here’s why: Card issuers want to be paid back. When you run a new business, they are taking a big risk in lending you money. If the business fails, they want to get paid back.
By asking you to give a personal guarantee, they have the option of going after your personal assets, which are likely to be more substantial than those of a brand-new business, to make themselves whole.
That said, not all startups are the same. If you have created a high revenue startup in your first year or two, you might qualify for a business credit card that does not require a personal guarantee. Card issuers may be willing to take a chance on going after the assets of the business if you cannot keep up with payments.
However, these cards generally have stringent requirements for applicants.
These are cards I am aware of that do not require a personal guarantee:
Brex Corporate Card for Startups
Designed for venture capital-backed startups and backed by PayPal co-founders Max Levchin and Peter Thiel, the Brex Corporate Card for Startups has no annual fee and unlimited points and requires no personal guarantee.
This is a charge card, so your balance must be paid in full every month. There is no APR. Credit is based on the cash the company has raised and equity in the company, as well as company spending patterns.
However, you must be part of a corporation or non-individual LLC. You cannot be a sole proprietor, part of an unincorporated partnership, part of an unregistered business or part of a business registered outside of the U.S. to qualify.
And you cannot be involved in certain business activities, such as the sale of cannabis or multi-level marketing. For more info, see the list of prohibited businesses.
Amex’s planned startup card
American Express is reportedly planning to issue a competing card for startups in the coming month.
According to a report in Bloomberg, owners will not have to provide a security deposit or personal guarantee.
Stripe Corporate Card
The payment processor Stripe has also issued a corporate card that does not require a personal guarantee to businesses that use Stripe.
The card requires payment in full every month, but does not charge interest or fees. There is 2 percent unlimited cash back for the two highest spending categories each cycle, and 1 percent cash back after that.
Eligibility is based on payment volume, the company’s history on Stripe, and the company’s bank account history. The company says firms that do not use Stripe can also apply, but Stripe needs to collect additional financial information from them.
Bremer Bank Signature Visa Company Card
One other option to consider, if your startup is a substantial size, you might qualify for the Bremer Bank Signature Visa Company Card.
Designed for medium-to-large businesses, it requires no personal guarantee but requires $1 million in annual sales and net income of $350,000 in each of the past two years.
What if you don’t qualify for any of these cards?
For most small business cards, you will have to provide a personal guarantee. If that is the case, never borrow more than you can personally pay back to grow your startup.
It’s better to grow slowly and fund growth through cash flow than put yourself in a precarious financial position you can’t get out of. No entrepreneur can make good decisions under crushing debt.
By avoiding it, you’ll have the peace of mind you need to achieve your vision for your business.