Q: How can I apply for a small business credit cards without a personal guarantee? Every card I check requires a Social Security number, is there some technique that I am missing?
Without a personal guarantee?
As much as you don’t want to think about it, many businesses fail, and yours might too. But the reason I bring that point is up is to demonstrate that it’s pretty risky for banks to loan to newer businesses.
That said, it is possible to get a business credit card without personally guaranteeing it, but it will be hard for new businesses. The exact requirements may vary by issuer but they are usually more or less consist of the following:
- 2+ years in business: Every major business credit card application, including those from American Express and Chase, clearly state on the application that you should have been in business for at least 2 years.
- Business credit history: All major issuers that I know of require this. For example, at the top of the application for the AmEx Business Gold Rewards card says “it is best for an established business with a strong credit history.” So if your business doesn’t already have a few trade lines reporting on your D&B file, then it’s going to be tough.
- Positive cash flow: This of course means you can’t be hemorrhaging cash flow (or worse yet, if you have no cash flow at all). But how much positive cash flow do you need to get a no personal guarantee business credit card? Well, there’s no universal answer, but what I can say is if your numbers aren’t strong, then charge cards (where your balance is due in full) will probably be easier to get than credit cards (where there’s an ability to carry a balance).
Not easy requirements for a newer business to meet, huh? If you’re not quite there yet but still want to build your credit, then here are a couple different ways credit cards may be able to help you:
Non-major credit cards from stores/gas stations: These will usually have looser credit requirements than major credit cards. To get a Staples card without providing a personal guarantee, you had to be in business for 3+ years and have annual sales of $5 million or more (obviously that’s out of the question for most of us!).
However some gas stations offer business credit cards (that can be only be used at their locations) which might be more lenient. I checked a few online and some, like the ExxonMobil card, had the same strict requirements as the Staples card. Others didn’t discuss the requirements so it would be best to call and check if you’re interested in trying to get one.
Major business credit cards that report to D&B: If you’re a new business and don’t come close to the qualifications, you may want to consider getting a card with a personal guarantee. This will probably be the easiest, quickest way a newer business card get a credit card (assuming your personal credit score is good).
Be warned: not all business credit cards will help…
If you do decide to use a personal guarantee, it’s important to know that not all the cards out there will be useful for building business credit… only some report accounts to D&B street if you apply with a personal guarantee.
Here is the card I personally use for my own newly formed LLC:
Updated August 2014