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 we all know the majority of new businesses fail within two years. I’m not going to quote any exact percentages here or anything like that, because I prefer to keep the discussion here positive and optimistic. But the only reason I bring that point is up is to demonstrate that yes, it is actually risky for banks to loan to newer businesses.
For this reason, can we really blame them for not offering new business cards without personal guarantees? As a small business owner myself, I wish just as much as you that it business credit cards were easier to get but in all fairness, I do understand (to a degree) why they’re tight-fisted with giving us business credit.That being said, it is possible 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, if you want major business credit cards without personal guarantees:
- 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. Even for 2013, in order to a get a Staples card without providing a personal guarantee, you had to be in business for 3+ years and 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 for getting a business credit card without a Social Security number, then you may want to consider getting one 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… in 2013 only some report accounts to D&B street if you apply with a personal guarantee.
Credit Card Forum advertises business cards from Chase, American Express, and many other heavy-hitters. Among them, the only ones I currently know of that report to D&B if you apply with a personal guarantee are the Chase Ink cards. Unfortunately the AmEx cards do not. To find out more, read my Chase Ink card review.
Here is the one I personally use for my own newly formed LLC: