What is a Business Guarantee

A business guarantee is a credit card agreement where charges to a corporate card are the sole responsibility of the business rather than the business owner or employees.

Breaking down Business Guarantee

A business guarantee agreement assigns credit card debt to the business entity rather than individuals. A standard credit card makes a sole signatory responsible for charges incurred. With a business guarantee, the credit card issuer treats all charges as if they were made by the business, rather than any individual card holder. Business credit cards are often used to separate the finances of the business from that of the business owner. The business owner is often required to provide detailed personal financial information as well and undergo a credit check when applying for such a card. Credit card companies are more easily able to conduct a background check on an individual than a company, particularly a small business that may not have much credit history. In some cases, the credit card issuer will grant a line of credit to the business but require a personal guarantee by its owner. Provisions in the credit card agreement indicate the party liable for debt incurred with the card. Business guaranteed credit card are more frequently issued to larger businesses than small companies because of a longer credit history.

Business credit card benefits and liabilities

A business credit card is easier and faster to obtain than a business loan because the card application process is automated and provides a rapid response. Business cards include added benefits so carry higher interest rates than traditional loans. And, credit card debt is usually unsecured, which increases financing costs because of higher risk to lenders. If a business does not have the minimum requirements required for credit scoring, revenue and income analysis, they are required to provide a personal guarantee, which holds the individual applying for the card liable for card payments and fees. In addition to offering the convenience provided by credit cards, business credit cards keep business spending separate from personal spending for accounting and tax purposes. They also aid in tracking employee travel and expense reporting.

Business credit cards benefits differ from cards for individuals. Business cards may offer cash back on certain purchases such as at office supplies, as well as travel discounts and perks. And they offer larger sign-up bonuses than individual credit cards in anticipation of high business spending as well as a  0% interest  introductory rate. Business credit cards may provide more flexible repayment terms, which can aid cash flow management.