How to Get a Business Line of Credit with No Personal Guarantee 

Traditionally, most lenders require a personal guarantee when offering a business line of credit. 

After all, it’s one of the simplest ways to provide security if you default on a credit line.  

But as we’ll learn, some lenders don’t require a personal guarantee as long as you qualify.  

What Is a Business Line of Credit with No Personal Guarantee? 

This is a form of business credit where a lender allows you to access funds through a line of credit without being personally responsible if you default.  

With a personal guarantee, you’re legally bound to cover the expenses in the event of a default.  

In this situation, the lender could seize your personal assets, such as your home, personal savings, and money from investments to recover the money, making it a secured business line.  

But when there’s no personal guarantee, this means your personal assets are protected.  

So, for example, if your business fails or goes bankrupt, you don’t have to worry about losing your personal assets.  

As a result, this type of unsecured loan is far more appealing for a business owner, as it allows you to get the cash flow you need without the risk of a secured loan to your personal assets.  

Why and When Do Lenders Require a Personal Guarantee? 

The main reason is that lenders can reduce their risk if a company defaults on a business credit.  

Whether it’s a secured line, term loan, merchant cash advance, or any other type of small business loan, a personal guarantee serves as collateral if the company is unable to repay and provides the lender with assurance.  

While the default rate on a small business loan is fairly low (1.74% from May 2021 to May 2022), lenders understandably want to cover themselves. And a personal guarantee is a simple way to provide a built-in security net for a business loan.  

As for when lenders require a personal guarantee, they’re more likely to do so when a business presents a substantial repayment risk.  

For instance, a new small business owner who recently launched a startup would be more likely to encounter a personal guarantee than one that’s well established.  

The same is true for a small business with a limited credit history or bad credit that doesn’t have the creditworthiness of a larger enterprise with a robust credit history.  

Also, companies in high-risk industries or that have fluctuating revenue are often required to have a secured business loan rather than an unsecured business loan.  

How to Qualify for a Business Line of Credit Without a Personal Guarantee 

Build Your Business Credit 

First, take care of the basics like registering your business, getting an EIN, and opening a separate business bank account (this shouldn’t impact your personal credit score).  

Apply for a DUNS number from Dun & Bradstreet, as this helps lenders, vendors, and suppliers identify your business and evaluate your creditworthiness.  

Also, apply for a business credit card. Just as having a consumer credit card is important for building personal credit, a business credit card is essential for building business credit.  

As you establish a positive business credit report with a business credit card, this should make your company more trustworthy, which will increase your chances of not needing a personal guarantee.  

Start with Tier 1 Business Credit Vendors 

Another highly effective way to build credit is to get business tradelines with vendors that report to major credit bureaus.  

Just like with a business credit card, as long as you pay on time or early, this should improve your business credit score and make you a stronger candidate for not requiring a personal guarantee for business financing.   

We suggest starting with tier 1 business credit vendors as opposed to tier 2 business credit vendors because they’re more accepting of companies with little (or sometimes no) business credit.  

For instance, eCredable Business Lift can help you raise your credit score with multiple credit bureaus by reporting your business utility and telecom payments. You can also report other accounts like a commercial lease, virtual office payment, business insurance, vendors, suppliers, marketing services, accounting services, web services and technology services. 

Here’s a list of tier 1 business credit vendors you can potentially partner with.  

Start with Low Credit Lines, Then Grow 

When you feel your business credit is where it needs to be, go ahead and apply for no personal guarantee business lines of credit.  

At first, you’ll likely have limited options..  

And that’s okay. Get whatever you can qualify for.  

Then, as you become more established and creditworthy, apply for credit line increases and more credit lines to increase cash flow over time.  

Just like getting larger credit card limits with personal credit, it’s a process.  

You should eventually qualify for a larger number of business lines with no personal guarantees.  

Increase Business Revenue 

Companies that earn around $4 million or more in annual revenue generally don’t require a personal guarantee for a corporate business credit card.  

And given that profitability is a major factor in determining whether or not a company needs a personal guarantee, it’s always to your advantage to increase business revenue.  

Types of Business Financing That Don’t Require a Personal Guarantee 

Tier 1 Trade Credit 

Tier 1 business credit vendors, as we mentioned earlier, don’t typically require personal guarantees.  

With this type of business financing, you’ll have access to a predetermined credit amount, and you can find a wide range of vendors for everything from office supplies, shipping supplies, marketing, invoice financing, and more.  

And to build your business credit score, make sure they report to at least one major business credit bureau.  

Corporate Credit Cards 

While getting a corporate business credit card can be difficult for small business owners that lack a strong credit score and financials, it should be feasible for more established companies with an annual revenue of $4 million or more. 

If you fall into the latter category, a corporate business credit card can be a great option. 

Just check the policies a prospective business credit card issuer has regarding a personal guarantee on a business credit card before applying. 

(It's worth noting here that if you have good personal credit, you can qualify for normal business credit cards with a personal guarantee. Brand new businesses often apply for 10 credit cards on the very same day. With a $10,000 credit limit each, that's a great way to access $100,000 in financing as a new business. This is called "credit card stacking".) 

Business Lines of Credit 

If your business credit is good enough, you should be eligible for a small business line of credit without a personal guarantee.  

Again, lenders like the Small Business Administration will usually require a strong business credit profile when taking this risk.  

But as long as your company has an established credit history and a solid credit report, a business line of credit should be a realistic option.  

Non-Recourse Commercial Real Estate Loans 

Unlike a recourse commercial real estate loan that allows a lender to seize your personal property if you default, they can’t seize your personal assets with a non-recourse commercial real estate loan.  

While they can seize the commercial property itself, your personal assets aren’t involved with this business loan, and the commercial property acts as collateral.  

Conclusion 

Although many lenders require a personal guarantee to serve as collateral when offering a business line of credit, not all do.  

Understanding the logic behind when and why a personal guarantee is required and taking steps to make your business more creditworthy should greatly increase your chance of becoming eligible.  

That way you can access critical cash flow with an unsecured business line or at the very least, limited personal guarantees.