Business Guarantee

Business Guarantee

Investopedia / Theresa Chiechi

What Is a Business Guarantee?

The term “business guarantee” refers to credit cards in which the business itself—rather than its individual owners or employees—is responsible for repaying the debts incurred. Business guarantees are commonly when businesses issue company credit cards to their employees. 

When applying for such cards, the credit card company will first evaluate the financial condition and creditworthiness of the business applying.

Key Takeaways

  • A business guarantee is a commitment made by a business to honor the debts incurred under its company credit cards.
  • It is similar to the personal guarantees extended by individual cardholders.
  • Business credit cards can help companies manage their expenses more easily, while also letting their owners benefit from limited personal liability.

How Business Guarantees Work

By providing a business guarantee, the owners of a business are making a commitment that their corporation will be responsible for any unpaid debts incurred using the business’s credit cards. For example, if an employee made an inappropriate charge using a company credit card, the corporation would ultimately be responsible for honoring that debt if the employee is unable or unwilling to do so.

Business guarantees are similar to the personal guarantees given by most cardholders. Yet while most credit cards are just used by a single cardholder, businesses often issue multiple credit cards to different owners and employees. By using a business guarantee, the credit card issuer treats all charges as if they were made by the corporation itself, rather than by the individual cardholders.


Because they are not secured by specific collateral, credit cards have higher interest rates than alternative loans such as term loans or lines of credit. In some cases, however, business credit cards provide attractive terms—such as 0% introductory interest rates—in order to attract new customers.

From the perspective of business owners, using a business guarantee can be advantageous for two main reasons. First, it allows the company to issue credit cards to multiple individuals without requiring them to acquire those cards under their own names. This streamlined process can help make it easier to process expense reimbursements on behalf of employees. 

Second, business guarantees provide a level of distance between the individual owners and the debts that their employees might incur. For example, if the business were unable to pay its debts and decided to enter bankruptcy, the individual owners of the business would often not be required to personally repay any of its debts. This is because the corporation is technically a separate legal entity as compared to its individual owners. Because the credit card debts were guaranteed by the business and not its owners, the owners would not be personally liable in the event that the business defaults on its debts.

Real World Example of a Business Guarantee

Dorothy owns a business with 10 employees. Frequently, she relies on her employees to make routine purchases on the business, such as booking airline tickets or buying new office supplies.

In the past, Dorothy would ask her employees to make these purchases using their own credit cards and then reimburse them using the company’s funds. To help make this process more efficient, however, she decided to issue company credit cards to her key staff members so that they can make these purchases directly from the company’s account.

In doing so, Dorothy’s business gave a business guarantee to the credit card issuer. This means that if Dorothy or her employees failed to make payments on their company credit cards, the company itself would be responsible for honoring those payments. As part of this arrangement, Dorothy had to provide the credit card company with financial information about her business, so that they could assess the business’s level of credit risk.