Business Credit Cards and Personal Liability: What That Means and Why It’s a Bad Idea

Zaid's picture
Zaid Rahman
November 15, 2021

You own a small construction company and rely on credit, but you’re concerned about the personal liability that can come with standard business credit cards.

Unfortunately, you can be personally liable for your business credit cards — and that can be costly in many ways.

But it doesn’t have to be that way with the Flexbase credit card.

We’ll explain what personal liability is and how the Flexbase card can free you from the concern that comes along with it.

Am I Personally Liable for My Business Credit Card?

Maybe, maybe not — it all depends on how your construction business is structured

Whether you structure your business as …

  • A limited liability company
  • A partnership; or
  • A corporation

the closer you are related to your business, the more liability you will likely assume.

Large corporations and LLCs are considered legally separate entities with the business owner and usually are not personally liable. 

However, many construction companies are sole proprietorships or partnerships, and in these cases, you and your business are considered the same. 

Because these types of businesses define the relationship this way, you remain personally responsible for credit card debt — even if the card is listed under the business name.

What Is a Personal Guarantee?

Personal guarantees are often a standard feature on business credit card applications.

For business credit cards, the personal guarantee clause states that both you and the business are responsible for paying the balance of the card. When the business isn’t able to make the payments, you, as the business owner, will be required to do so.

Corporate credit cards are different, relieving the corporation owner of personal liability. Most small businesses do not qualify for these types of cards because eligibility depends on:

  • Being a well-established company
  • Having substantial revenue; and
  • Possessing a long credit history 

Why Do Business Credit Cards Require a Personal Guarantee?

Some level of risk is inevitable when credit is involved — both on the part of the borrower and the lender.

The borrower always runs the risk of not being able to make regular credit card payments. 

Most credit card debt is unsecured, meaning there is no collateral to claim when the debt is unpaid. Because of this when creditors offer credit to construction businesses, they risk not being paid.

In the construction industry, high credit limits are both necessary and common. With higher credit lines comes a higher risk for the credit card company.

A personal guarantee helps lower risk for credit card companies in case of late or no payment. The business may be off the hook, but that’s when you become personally responsible.

Why a Business Credit Card for Your Construction Business Is a Bad Idea

Business credit cards for your construction company are not a best practice for several reasons:

  1. As the business owner, you assume 100% responsibility even when the card is in the business name and used for business expenses.
  2. Credit cards for your business can cost you lots of money in the long run with exorbitant late fees and penalty APRs.
  3. Late payments or inability to make payments can affect not only your business’s credit score but can also negatively affect your personal credit score.
  4. Lower credit limits can also be an uncomfortable consequence — and one that not many construction companies can afford since construction equipment and supplies can come at hefty prices.

Why the Flexbase Credit Card Is the Preferred Card for Construction Businesses

If you’ve been using a business credit card for your construction business and have experienced negative personal repercussions because of it — there is another way.

The Flexbase credit card is unlike any business credit card you’ve ever used.

Construction company owners who take advantage of the Flexbase credit card will find it superior to other credit options for the following reasons:

  • 60 days to pay, 0% interest -  We know every job has different needs. This is why our card is flexible and easy to use, with great rates too!
  • One-touch expense tracking - The Flexbase credit card keeps track of receipts and expenses and assigns them to specific projects in real-time.
  • Designed solely for construction businesses - Flexbase knows the construction industry and the unique financial challenges construction companies often encounter. Our credit card has you — the construction business owner —  and your needs in mind.
  • Up to 10x credit limits - We know how expensive the construction business can be, and we equip you with higher credit limits so you can make the purchases necessary to keep your business going.
  • No need for credit scores - We base eligibility on your future invoices and the positive health of your business, essentially rendering credit scores insignificant.
  • Business liability - With the Flexbase credit card, you experience no personal liability.

Avoid Personal Liability With a Credit Card Designed for Construction Businesses - The Flexbase Card

Most construction companies rely on credit for costly purchases or other expenses.

Stop using credit cards with high personal consequences and turn to the credit card created especially for those in the construction industry.

Not only does the Flexbase credit card protect your personal interests, but it also comes with added advantages and services that other business credit cards don’t offer.

Join Flexbase for free and apply for the only credit card construction company owners need. 

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