When you open a business, you’re not the only one taking a financial risk, your credit card issuer is, too. So to minimize losses in the event that your company isn't successful, lenders generally require you to sign a personal guarantee when you apply for a business credit card.
What is a Personal Guarantee? A personal guarantee is an agreement you make with your creditor to personally pay your business debts if your company can't. It’s similar toco-signingfor someone’s credit card. If your company falls behind on its payments, you’ll be personally responsible for those payments and the creditor has the right to go after your personal assets, including cash, real estate, etc.
While this doesn't always seem ideal, using business credit with a personal guarantee does have its advantages. Check out the below 3 benefits of using business credit with a personal guarantee:
1. Minimum Qualifications Qualifying with a personal guarantee is pretty straight-forward. There are only 2 requirements: good personal credit and healthy projected income. Lenders want to know how well an applicant has managed his or her personal funds, and if the applicant is able to project substantial earnings from their business' products and/or services.
2. Quick Transfer of Funds Business credit refers to the securing of credit cards under your business entity. Typically, funding with a personal guarantee is swift and seamless. There are no long waits or strenuous application processes. Do you recall how quickly lending decisions came back after you applied for personal credit cards? Business credit decisions work the same. Most decisions are instant while others take a little over a week.
3. NO attachment to your personal credit file As a business owner/investor it's best practice to keep your personal credit clean. A clean credit profile characterizes you as an attractive business partner and ideal lending candidate. The benefits of great credit are endless; fortunately, business credit allows you to maintain great personal credit while still granting you access to the capital you need. Although, you are personally guaranteeing funds, business credit does not appear on your personal credit file unless you default.
Making the minimum payments required is non-negotiable. Requirements for business credit with a personal guarantee are minimal; however, simply applying does not guarantee maximum funding. We suggest consulting an expert or a professional service. They should be able to assist you with qualifying for and securing maximum funding.
Interested in applying for business credit? The team at 100 Percent Financed is here to help!Click hereto get an overview of our program, learn about our unique model and common FAQs, and see the states where we currently offer business credit cards.