Building Business Credit Without Personal Guarantee

small business loansAs you begin to build business credit, it is essential that you keep your business credit and your personal credit separate. Using your personal credit cards or lines of home-equity credit to increase the purchasing power of your business puts your personal assets at risk.

Additionally, leaning on the crutch of personal credit means you are missing opportunities to develop your small business’s payment portfolio. However, many commercial lenders and suppliers are hesitant to extend financing or lines of credit without a personal guarantee, especially to a first-time small business owner. In order to earn business credit without a personal guarantee, a small business must establish and maintain a strong payment performance record by obtaining smaller lines of credit, making purchases and paying invoices on time.

Business Credit Cards

One of the most efficient ways to build business credit without a personal guarantee is with a secure business credit card. Compare the terms and fees of various corporate credit plans to find the card that best fits your overall business strategy. If you are willing to extend a personal guarantee, then you may be able to secure a higher spending limit, but you will be risking your personal assets.

It is always best to borrow from lending agencies that do not require a personal guarantee, but if you do decide to provide a personal guarantee make sure that any reports filed by your lender will not effect your personal credit score. Verify that your lender is reporting your payment performance every month to the major business credit bureaus, and make all of your payments on time or ahead of time in order to quickly improve your credit score.

Small Business Loans

The Small Business Administration or SBA offers secure loans to emerging small businesses without a personal guarantee. SBA Guaranteed Loans are designed to provide first-time business owners with financing for equipment, inventory, real estate or working capital. Many municipalities and counties also offer third-party guaranteed small business loans. These loans are typically small but can make a big difference to a business that is focused on building a strong credit record.

If you are able to obtain a small business loan make sure to retain a portion of the funding to use in repaying your loan in a timely and consistent manner. Using retained monies to pay back your loan balance will help you to establish business credit for the future.



Marshall Walker Lee graduated Summa Cum Laude from the University of Michigan's Honors College with degrees in Writing and Philosophy. As a freelance writer and designer he has developed branding strategies and programming for J. Walter Thompson, Nike, the Kellogg Foundation, Spike TV, Sony Films, and General Motors. He is the co-founder and director of Poor Claudia, a 501(c)3 non-profit publishing enterprise based in Portland, Oregon.