Do corporate credit cards require a personal guarantee?
How do corporate card personal guarantees work?
Corporate credit cards can be the ideal solution for managing a company’s finances. They allow holders to benefit from rewards, streamline expense tracking, and can even improve a business credit score. However, the majority of issuers require a personal guarantee before approving a corporate credit card application.
Thankfully, for business owners who meet certain requirements, there are a number of corporate credit cards that they can take advantage of without putting their assets at risk.
Why do credit card issuers require a personal guarantee?
To mitigate the risk involved with extending credit, most issuers require a personal guarantee. This is a declaration by the account holder that they are personally responsible for repaying all debts incurred on the credit account. It permits the issuer to seize their personal assets in the case of a defaulted debt.
This type of security is essential for lenders because business credit cards tend to have much higher credit limits than personal credit cards. However, for businesses that meet specific requirements, issuers may choose to approve credit card applications without a personal guarantee.
A business will likely need to meet high thresholds on the business size, revenue, expenditure, and credit rating to qualify for a corporate credit card without a personal guarantee. Payment will also be required in full each month. These credit cards may be limited in terms of the products employees purchase and where they shop.
Common requirements for a corporate credit card with no personal guarantee
While the requirements will vary by the specific issuer and credit card, companies will typically need between $1-4 million in annual revenue for approval without a personal guarantee. Issuers also require the company to have between one to two years of cash reserves, or possibly even more.
For corporate credit cards that are restricted to certain purchases — such as gas — businesses will need $1 million or more in annual revenue. Businesses will need annual revenues between $4 million up to $25+ million to qualify for corporate credit cards without those kinds of restrictions.
These corporate cards can also carry annual spending requirements, a minimum number of card users, and annual costs per card.
The different types of corporate credit with no personal guarantee requirement
There are three types of corporate credit cards that don’t require a personal guarantee. Each comes with different requirements and benefits. Whether or not they are suitable for your business will depend on a variety of factors.
Corporate credit cards
Corporate credit cards are best suited to businesses that have a minimum of 15 card users and make at least $250,000 each year in credit card transactions
They are ideal for companies that need to fund travel or entertainment expenses. Many corporate credit cards feature integrated expense tracking systems and rewards, such as frequent flyer miles and airport lounge access. Liability for repayment of corporate credit cards can rest solely with the corporation or be shared jointly with the individual cardholders. In the case of the latter, the employee will pay the monthly credit card bill, and the company will then reimburse them.
|$4-$25+ million annual revenue||Integrated expense tracking systems||No interest for businesses with $250,000 - $1 million annual spend|
|15+ card users||Travel and entertainment rewards||Up to $100 annual costs per card|
|Paid in full each month||-||-|
The majority of corporate credit cards with no personal liability will need to be repaid in full each month. As a result, the business will pay no interest on its credit card transactions. However, high annual fees can apply per card.
Prepaid business credit cards
Companies that wish to maintain disciplined spending or avoid credit checks should consider a prepaid corporate credit card. No liability or personal guarantee is required as the cards are backed by the owner’s cash. This makes them a good choice for company owners that have a credit score of 660 or less.
The prepaid nature of these cards also means that only a set amount of cash is available for spending. This mitigates the risk to both the issuer and the holder, as it limits overdrafts and going over a credit limit. This also reduces the risk of employee misuse, with many issuers offering zero liability protection.
|Secured by cash||No credit check||No Apr|
|-||Reduces the risk of theft and employee misuse||-|
Prepaid business credit cards can be used for all the same purchases as standard credit cards, but they don’t offer the same rewards. You may also be charged $25 or more in monthly card fees if you require more than two credit cards.
Corporate gas/fleet cards
Like a corporate credit card, a corporate gas or fleet credit card can either have sole-corporate or joint liability with the individual cardholders. These cards restrict cardholder purchases to gas, vehicle maintenance, and repairs at specific businesses. They also allow holders to benefit from discounts on fuel and vehicle-related purchases.
A corporate fuel card is a good choice for companies that regularly use two or fewer vehicles. Businesses that operate more than two vehicles with a monthly average of 1,000 to 5,000 gallons of gas should consider a corporate fleet card.
Corporate gas cards can require a personal guarantee, but businesses with $1 million or more in annual revenue may not be subject to this requirement. Business owners who wish to apply for a corporate gas or fleet card with no personal guarantee will need to have a personal credit score of at least 650. These cards can also include high APRs and monthly charges, although they may be waived for holders who meet a set gallon threshold per month.
|$1+ million annual revenue||Restricts spending to fuel and vehicle-related purchases||Average APR of 23%|
|2 or less vehicles for gas card or 2+ vehicles with 1,000 - 5,000 gallon average monthly gas usage for fleet card||Discounts on fuel and vehicle-related purchases||Up to $25 annual cost per card|
|Minimum personal credit score of 650||Fees may be waived for meeting a set monthly gallon threshold||-|