Business Credit With and Without Personal Guarantees

Business Credit With and Without Personal Guarantees

March 13, 2015
Building business credit can be accomplished a couple of ways

Quite a few people who have a bit of an understand of business credit come to us and say I want to build business credit in my company’s name AND I don’t want to use my personal credit. Usually, the ones who are most adamant about this have a few dings on their personal credit or have experienced a trauma with using their personal credit for business in the past. Look I get it and totally understand. It is possible to do build business credit with no personal credit used, but I’m all about providing the truest and clearest picture.

Obtaining business credit with No Personal Guarantee

Building business credit without a personal credit check or not having to worrying about tanking your personal credit is absolutely the route to go if you can do it.  We can help business owners build business credit without a personal guarantee (No PG). In less than 4-6 months you can have access to $50,000 in credit. This credit can be used to operate and expand your business or buy supplies and equipment.

You definitely are at an advantage with business credit because you can conserve precious cash flow. Also, you protect your personal assets, by separating business expenses and loans from personal finances.

I will remind inquiring entrepreneurs who want to know that you may not obtain cash credit immediately if you are only attempting to use your company as a guarantor. This simply means that most if not all of your business credit starting out will be vendor credit. This could entail Net 30 accounts which you pay within 30 days. You may be able to obtain well-known store cards that still can prove highly beneficial to your company.

Cash credit, will take some time after you’ve proven yourself, but it is not impossible. We have a strategy of speeding this process up if you want Corporate Only cash credit.

Receiving Business Credit With a Personal Guarantee

If your credit is great or pretty decent, you are at an advantage because you can get cash credit including loans and revolving credit off the bat. Even if your company is still a youngster, you can reasonably obtain $50,000-$75,000 in cash credit. As with No PG business credit, your credit lines do not report on your personal credit. These business credit lines will however report on your personal reports if you begin to pay late for a certain amount of months. So in a sense, the business credit turns personal. Hence, the term Personally Guaranteed.

This is why many business owners with bruised personal credit or those with good personal credit don’t want to go that route.  If you are able to avoid a Personal Guarantee then, by all means, do so. Sometimes, it is simply unavoidable, especially if you want substantial cash credit or if you are financing a high ticket item.

Personal Guarantee Pros and Cons

If you want a nice amount of cash fast and have good credit, then the PG route may be your best bet, especially if you do not have adequate business credit and your revenues do not support a No PG request.  The bad thing about using a PG is that your personal scores will take a hit if you are unable to pay your business credit bills on time.  You still are building business credit if you stay in good standing.

It usually takes at least 60-90 days of late payments before a business credit lender starts to report delinquent activity on your credit. Some never report late activity on your personal, but don’t count on that. In your credit card or loan agreement, it states that they have right to report missed payments on your personal credit after a certain amount of missed payments.

No Personal Guarantee Pros and Cons

When using Corporate Only credit or credit without a PG, you can rest assured that your business credit will be built and it will never report to your personal credit even if things go south. You are often able to get many of the things most businesses need on a daily basis to operate. Supplies, marketing, equipment, and vendor credit are just a few of the things you can obtain without providing your Social Security number for approvals.

The downside to No PG business credit that obtaining cash credit right away is rare for companies that are less than a certain age.  Also, sufficient revenues play an important part in getting Corporate Only Cash credit.  It is not entirely impossible for a younger company if you are building credit the right way, but it is far more easier to get cash credit with a PG if you’re a young company.  Still, our business credit building strategies can help expedite the process obtaining the Holy Grail No PG credit-CASH.  It takes time, but it can be done.

Even if you are not able to obtain cash credit immediately, it is nevertheless a win to obtain some of the things you would have paid for with cash anyway.

Overall, what’s most important to keep in mind is to have a goal and mind and a plan. Whether you choose to personally guarantee credit or do without, we can help you make sound choices for your business credit needs.