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Business lines of credit with no personal guarantee required

If your business has good credit or collateral, you might be able to get a business line of credit without a personal guarantee.

Getting a business line of credit (LOC) to run or grow a business can be difficult to qualify for and often requires a personal guarantee from the owner. Personal guarantees help mitigate the risk for lenders but put the business owner in a more precarious position. However, you can still get funding for your business without a personal guarantee if your business meets other eligibility requirements.

Compare business lines of credit with no personal guarantee

These lenders offer LOCs and may not require a personal guarantee, but you may need to meet alternative criteria.

LenderLoan amountsLoan termsBasic requirements
Lendio$1,000 to $250,0006 to 18 months6 months in business, $50,000 in annual revenue, 600 credit score
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Kapitus$10,000 to $250,00036 months2+ years in business, $180,000 in annual revenue, 650 FICO score
Clarify CapitalUp to $5 million6 to 18 months6 months in business, $10,000 monthly revenue, 550 credit score, business bank account
National Business Capital$100,000 to $10 millionNot stated1 year in business, $500,000 annual revenue
Read review
Chase$10,000 to $500,000Up to 5 yearsNot stated
Read review
Backd$10,000 to $750,0006 or 12 months1 year in business, 600 FICO score, $300,000 annual revenue, business bank account, US-based business
OnDeck$6,000 to $100,00012, 18 or 24 months1 year in business, 625 FICO score, $100,000 in annual revenues, business checking account
Read review
BluevineUp to $250,000Up to 12 months1 year in business, corporation or LLC, 625 FICO score, $120,000 in annual revenue, no bankruptcies
Read review
Idea FinancialUp to $275,000Up to 18 months2 years in business, $15,000 in monthly revenue, 650 credit score, no sole proprietorships or nonprofits

What is a personal guarantee?

A personal guarantee on a business loan means you agree to take personal responsibility for your company’s debt if the business can’t repay it. If you sign a personal guarantee and your company defaults on the loan, the lender requires you to pay it out of your own pocket. If you don’t, it may go after your personal assets, such as your house, car or other property.

Depending on your business and the lender, you may be required to sign either a limited guarantee or an unlimited personal guarantee. Just like it sounds, an unlimited guarantee means you’re personally held responsible for the entire outstanding debt. A limited guarantee means you’re only responsible for a portion of the debt.

If you’re the sole owner of a business, you’ll most likely be required to sign an unlimited personal guarantee. For example, if your company ran up $50,000 on a line of credit and can’t repay it, you’ll have to come up with the full $50,000. If you have partners, you may each sign a limited personal guarantee for a percentage of the debt.

Pros and cons of getting a business line of credit with no personal guarantee

If you qualify for a business line of credit without a personal guarantee, it’s important to consider the pros and cons of this kind of funding source.

Pros

  • Obtain funding for your business
  • No risk to personal assets
  • Only have to pay interest on funds used
  • Helps build business credit

Cons

  • May require collateral
  • Potentially higher rates
  • May need a business credit score
  • Potentially smaller credit limits

Why are personal guarantees sometimes required?

A personal guarantee is typically required if you’re a newer business, haven’t established business credit or don’t have strong financials. Since these situations are riskier for the lender, collateral ensures the lender is still repaid through personal assets even if the business defaults.

In general, it can be tough to qualify for a business line of credit without a personal guarantee, but it’s not impossible. You’ll likely need to meet other fairly strict requirements, which can vary by lender.

“It really depends on the lender,” says Joseph Camberato, CEO at National Business Capital. “Some will ask for collateral, while others won’t. If you don’t have collateral, most lenders will want you to have been in business for a couple of years, show good cash flow management, and have a decent personal credit score — usually around 650 or higher. The better your score, the better your chances.”

You may also need a strong business credit profile to avoid signing a personal guarantee to get an LOC, adds Michael Baynes, cofounder and CEO at Clarify Capital.

“Having established business credit is important. Lenders use your company credit profile to determine your trustworthiness in the absence of a personal guarantee. This includes a positive payment history with vendors, suppliers and other creditors.”

In some cases, you may qualify for a business line of credit without a personal guarantee, business credit or collateral, but the terms may not be as favorable.

“Although uncommon, it is conceivable,” says Baynes. “Some lenders provide unsecured business lines of credit based on the overall viability of the company. These often offer higher interest rates and smaller credit limits.”

Alternatives to business lines of credit without a personal guarantee

It can be tough to meet the requirements for a business LOC without a personal guarantee, but there are other options.

  • LOC with a personal guarantee. The reality is you may not qualify for a line of credit without a personal guarantee. On the upside, you may qualify for a better rate and higher credit limit than you would if you didn’t sign the guarantee.
  • Business credit cards. It could be easier to qualify for a business credit card, and you may not have to sign a personal guarantee. But it might come with higher rates, and you won’t have ready access to cash as you would with an LOC.
  • Invoice factoring or financing. B2B firms with unpaid invoices could benefit from invoice financing or invoice factoring, but you may have to make weekly or even daily payments, which could be a struggle.
  • Equipment financing. When you finance equipment for your business, the equipment acts as collateral for the loan, which can get you a better rate. Plus, an equipment loan can preserve your cash for other purposes.
  • Term loans. There may be personal guarantee requirements for business term loans, but there are secured and unsecured options that could meet your needs.
  • Merchant cash advances. For companies with a lot of credit card sales, a merchant cash advance can be a fast way to access working capital, but it is one of the more expensive business financing options.

Bottom line

Qualifying for a business line of credit with no personal guarantee is challenging, but it can be done. It’s easier for well-established companies with good business credit, but if you have strong financials or collateral, even newer businesses may qualify for LOCs with no personal guarantees.

Frequently asked questions

Do lenders do personal credit score checks for business lines of credit?

Yes. Most business loan lenders check borrowers’ credit scores as part of the application process. This is typically true even if you’re not signing a personal guarantee. Because it’s your business, lenders usually want to see you’ve been responsible for personal and professional debt.

What credit score do I need for a business line of credit?

To get a business line of credit, you’ll most likely need a credit score of at least 600 to qualify, although a few lenders accept lower scores. However, credit scores of at least 700 or more are needed to qualify for the best rates and loan terms.

Do business LOC lenders conduct a hard credit inquiry?

It depends on the lender. Some only do a soft inquiry to check your score before the actual application process, while others may conduct a full hard inquiry to dig deeper into your credit profile. However, lenders are required to get permission from you before they do a hard pull, so it won’t happen without your authorization.

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To make sure you get accurate and helpful information, this guide has been edited by Megan B. Shepherd as part of our fact-checking process.
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Written by

Writer

Lacey Stark is a freelance personal finance writer for Finder, specializing in banking, loans, investing, estate planning, and more. She has 20 years of experience writing and editing for magazines, newspapers, and online publications. A word nerd from childhood, Lacey officially got her start reporting on live sporting events and moved on to cover topics such as construction, technology, and travel before finding her niche in personal finance. Originally from New England, she received her bachelor’s degree from the University of Denver and completed a postgraduate journalism program at Metropolitan State University also in Denver. She currently lives in Chicagoland with her dog Chunk and likes to read and play golf. See full bio

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