Are business credit cards personally guaranteed?

Most (but not all) business credit cards are personally guaranteed. If you run a small business or a startup with little credit history, it’s likely that you’ll need to sign a personal guarantee to get approved for a business credit card.

6 min read
Man on his laptop, looking at credit card

What is a personal guarantee? 

A personal guarantee is a legally binding commitment whereby you agree to accept responsibility for paying a business credit card if the business is unable to do so - even if the card is used exclusively for business purposes.

Essentially, you guarantee that if your business can’t pay off the balance, you will cover the full cost yourself. 

Personal guarantees are normally signed by a manager, director or owner of a company. Employees wouldn’t be asked to sign a personal guarantee, even if they are classed as cardholders. Additional cardholders can spend on the card but aren’t liable for paying the balance.

Why does a business credit card require a personal guarantee? 

The main reason why business credit card providers request personal guarantees is to reduce the risk of not getting their money back. A personal guarantee means if the business can’t pay, the lender can chase the person who signed the guarantee instead.

As part of the application process, the lender will usually check your personal credit history as well as your business credit history – especially if you have a startup business or a small business with little financial history to go off.

Is a personal guarantee legally binding? 

Yes, a personal guarantee is legally binding. This means that you can’t get out of it, even if the company goes bankrupt. In fact, a personal guarantee is in place to ensure that the business credit card is paid off even if the business dissolves. If you don’t fulfill your side of the contract, then legal proceedings could be taken against you.

How long does a personal guarantee last? 

A personal guarantee is valid for as long as it states on your original credit agreement, so you need to check the terms and conditions before you apply.

It’s worth asking the lender how long the personal guarantee will last before taking out a business credit card, to make sure you’re happy with the terms. If you are uncertain about whether you’re getting a good deal, speak to an independent financial adviser or seek legal advice.

Does a personal guarantee affect credit? 

A personal guarantee won’t affect your credit score if the debt is paid on time, every time. But if your business falls behind on repayments, you will become liable for the debt and this can affect your credit score.

Any missed payments will remain on your credit report for six years, which can affect your ability to get credit in the future. This is because your personal finances are linked to your business credit card when you sign a personal guarantee.

Tip: Make sure you don’t overspend on your credit card. That way, you can keep interest payments down. One way of doing this is to limit the number of cardholders who can use the account.

What happens if you default on a personal guarantee? 

If you default on a personal guarantee, your credit score could be damaged significantly. As mentioned above, your business credit card is linked to your personal finances. This means that defaulting (i.e. missing three to six payments) will leave a footprint on your credit report for six years. This can seriously reduce your chances of getting finance in the future.

Do all business credit cards require a personal guarantee? 

Not all business credit cards require a personal guarantee, but most do. However, it’s unlikely that you’ll be offered a business credit card without one unless your business is a large corporation with high revenue.

New and small businesses are usually asked to sign a guarantee, as there is more risk involved when a company has just started or has little credit history to recommend them. You may find it difficult to get a credit card without a personal guarantee as they are few and far between, and are usually reserved for large companies with high revenue.

How can I get a business credit card without a personal guarantee? 

To help you find the best business credit card for you without a guarantee, follow these four simple steps.

1. Decide which type of deal you want

First, think about what features are most important for your business to get from a card. Perhaps a high credit limit, 0% on purchases, or the ability to earn rewards or cashback? It’s likely that you’ll have to compromise in some areas, so defining which type of deal you want can help you narrow your options down.

2. Research the market

Compare different deals on the market to find a business credit card that fits your criteria. You may also be able to find some lenders who don’t require business customers to have a personal guarantee. You can look for deals using comparison websites, seeking help from a broker, or by going directly to lenders.

3. Choose a business credit card

When you’ve conducted adequate research, it’s time to pick the card you want to apply for. It’s important that it meets your criteria, otherwise you may be stuck with a card that doesn’t properly benefit your business.

4. Check that you meet the requirements

To get around needing a personal guarantee, some lenders require you to have a minimum amount of revenue or number of employees. Checking this before you apply could save you from your application getting rejected.

Disclaimer: All information and links are correct at the time of publishing.

Fiona Peake, Personal Finance Writer

Fiona Peake

Personal Finance Writer

Fiona is a personal finance writer with over 7 years’ experience writing for a broad range of industries before joining Ocean in 2021. She uses her wealth of experience to turn the overwhelming aspects of finance into articles that are easy to understand.