For a newly established business without corporate credit, the basis for approval for business credit cards would be the owner’s credit history. If you carefully examine your contract, it contains a clause that discusses your personal liability as the owner of the account. What does the personal liability provision mean and how should this affect you?
Personal Guarantee on Credit Cards for Business
When you sign the agreement, you also agree that you would personally guarantee the account. This means that in case the business fails and repayment becomes difficult, you- the owner is liable to pay off all charges in your business card.
Under the liability clause, the card holder’s credit history can be damaged if there would be unpaid charges on the business account. If your company incurs a large amount debt, your own credit rating can drop even if you don’t have any problem with your personal accounts. As the credit card owner, you are directly responsible for this account.
Can You Get Off from Personal Liability?
Is it possible to be free from the personal liability clause? The answer is yes, it is possible. If you have been using your business credit card for at least two years or more and your record shows that you’ve been a consistent payer, you can request from your issuer to remove the liability provision. Still, the decision would depend on your business credit card issuer.
It is recommended for business owners to register with a business credit bureau immediately. As soon as you’ve opened the company, you can establish a separate credit history for your company by signing up with major credit reporting agencies like Dun & Bradstreet and Experian (Business). Once this is done, you can apply for a business credit card to start building up your corporate credit more easily.