There are several steps to apply for a business credit card without personal guarantees. When business owners apply for credit cards, creditors typically require a legally binding financial guarantee from the owner. This guarantees the owner will personally pay off balances the company itself is unable to pay. Most credit card companies require this guarantee, but there are a few that don’t under specific circumstances. As a financially-minded business owner, get a no guarantee credit card to create separation between business and personal finances, help when money is tight, and earn rewards. Read on to discover a five step guide on how to apply for business credit cards without a personal guarantee.
Separate Yourself from Company
First, set yourself apart from your company to enable a degree of separation between your business and personal finances. Typically, this can be done by incorporating or registering as a limited liability company (LLC.) Both are separate entities from their owners. Thus, register for an additional identification number with the IRS. This way, you ensure financial institutions only see your company’s financial and credit histories, instead of your personal histories. Ideally, you should open a business bank account to keep your finances separate. Surely, separating yourself from your company is a first step that creates separation between business and personal finances.
Leverage Creditor’s Trust
Second, leverage the trust and relationship you’ve built with your financial institution. With a good payment history, low debt-to-credit ratios, and solid business financials, owners often negotiate themselves out of personal guarantees. Additionally, some banks waive the guarantee if you’ve had the card for extended periods while making on-time payments and building up your business credit score. In fact, if you already have a line of credit, your bank might waive the personal guarantee on later funding rounds. Absolutely, leverage your creditor’s or financial institution’s trust to increase the likelihood of their waiving the guarantee requirement.
Demonstrate Financial Stability
Next, demonstrate the financial stability of your business to creditors. Since no guarantee cards carry a lot of inherent risk, several have strict, challenging capital requirements. For example, some cards require you to have at least $100,000 in the bank before applying. Others tend to have similar requirements, such as over $1 million in revenue annually. Additionally, display your business’s consistent spending patterns and clean financial history to meet these requirements. You may need to change your money habits to show this. Certainly, demonstrate your company’s financial stability to show creditors you can handle a no guarantee card.
Improve Company Credit Score
Improving your company’s credit score is a great way to reduce your perceived risk to creditors. Make your company credit reports better by following a few steps. First, get a credit card in your business’s name, shopping around to determine the best deal and whether the card only reports to business credit files. Second, apply for a third-party guaranteed loan, and save some of its proceeds. Set aside 20-30% of the loan money to ensure your on-time repayments. Third, establish vendor lines of credit to diversify your credit portfolio and let the accounts age. This way, you demonstrate your financial savvy and trustworthiness to creditors. Definitely, improving your company’s credit score significantly impacts the chances of securing a no guarantee business credit card.
Determine Best Option for You
Lastly, weigh the various no guarantee card options to determine the best option for your business’s unique needs. Often, the best way to do this is to consider the features of the cards. However, considering the rates is also important. Typically, offered rates are offered in two categories: introductory and ongoing. Introductory rates persuade you to apply for that specific option by promising various perks, such as 0% APR, during a specified period after reception of the card. Typically, this period is 9 months to a year. Additionally, consider the credit and savings account rewards programs available. Depending on your business, these rewards tend to have significant savings and efficiency impacts. For example, if you need to travel internationally a lot, cards providing frequent flyer miles can mitigate those high expenses. Of course, consider various aspects of prospective no guarantee cards to determine the best fit for your business.
Applying for business credit cards without personal guarantees can be done in a myriad of ways. For example, one way involves setting yourself and your finances apart from the company’s as the first step. Second, leverage your existing relationship with your bank and attempt to negotiate the removal of the personal guarantee requirement. Third, demonstrate your business’s financial stability to reduce its risk in teh eyes of creditors. Next, improve your credit score to significantly increase the chances of being granted a no guarantee card. Finally, evaluate several aspects of card options such as rewards, rates, and fees to determine the best card for your business. When wondering how to apply for business credit cards without a personal guarantee, consider the steps described above.