Business Credit Cards

Introduction

Business credit cards are a great tool for small business owners to manage their finances and build credit. However, not all business credit cards are created equal. Some require a personal guarantee while others do not. In this article, we will compare business credit cards with and without personal guarantees.

What is a Personal Guarantee?

A personal guarantee is a legal agreement that makes an individual responsible for a debt if the business is unable to pay it back. In the case of a business credit card, a personal guarantee means that the business owner is personally responsible for any debt incurred on the card. This means that if the business is unable to pay back the debt, the business owner's personal assets may be seized to pay it off.

Business Credit Cards with Personal Guarantees

Most business credit cards require a personal guarantee. This is because small businesses are considered high-risk borrowers, and credit card companies want to ensure that they will be repaid. Business credit cards with personal guarantees typically have higher credit limits and more rewards than those without guarantees.

One benefit of a business credit card with a personal guarantee is that it can help build the business owner's personal credit score. By making timely payments and keeping the balance low, the business owner can improve their personal credit score, which can help them in the future when applying for loans or other credit products.

However, the downside of a business credit card with a personal guarantee is that it puts the business owner's personal assets at risk. If the business is unable to pay back the debt, the credit card company can go after the business owner's personal assets, such as their home or car, to pay it off.

Business Credit Cards without Personal Guarantees

There are also business credit cards available that do not require a personal guarantee. These cards are typically offered to more established businesses with a strong credit history. Without a personal guarantee, the credit card company cannot go after the business owner's personal assets if the business is unable to pay back the debt.

One benefit of a business credit card without a personal guarantee is that it can help protect the business owner's personal assets. However, these cards usually have lower credit limits and fewer rewards than those with personal guarantees.

Conclusion

Choosing a business credit card is an important decision for small business owners. While cards with personal guarantees may offer higher credit limits and more rewards, they also put the business owner's personal assets at risk. On the other hand, cards without personal guarantees offer more protection for personal assets but may have lower credit limits and fewer rewards. It's important for business owners to weigh the pros and cons of each type of card and choose the one that best fits their needs.