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Business verification · KYB

What is KYB (Know Your Business)?

Last updated · Kaaj editorial team

KYB, or Know Your Business, is the process of verifying that a business is real, legally registered, in good standing, and owned and controlled by the people who say they run it. Lenders run KYB before extending credit to confirm the applicant exists, check that the application matches independent records, and screen the business and its owners for sanctions and other risk.

KYB vs. KYC

KYC (Know Your Customer) verifies an individual: name, date of birth, address, and identity documents. KYB verifies a business entity and then runs KYC on the people behind it, such as owners, officers, and guarantors.

For a lender, KYB answers a different question than identity verification: does this business exist as described in the credit file, and do the documents in the package belong to it?

What a KYB check covers for lenders

  • Secretary of State status: the entity is active and in good standing in its state of formation and any states where it operates.
  • Formation date vs. stated time in business: a two-year-old LLC claiming ten years of operations needs an explanation.
  • EIN verification: the tax ID matches the legal name.
  • Owners and officers: the people on the application appear in state filings or ownership documents.
  • Address and web presence: the business has a real location and an online footprint consistent with its industry and age.
  • Industry classification (NAICS): the business does what the application says, which matters for restricted-industry policies.
  • Sanctions and adverse records: OFAC screening, liens, judgments, and bankruptcies.
  • Industry-specific records, such as SAFER/FMCSA data for trucking companies.

Documents commonly used in KYB

  • Articles of incorporation or organization and any amendments
  • IRS EIN confirmation letter
  • Operating agreement, bylaws, or ownership schedule
  • Government-issued IDs for owners and guarantors
  • A voided check or bank letter matching the business name

KYB red flags

  • Entity inactive, dissolved, or administratively revoked
  • Formed or reinstated shortly before applying
  • Registered agent or address shared with many unrelated businesses
  • No website, a brand-new domain, or a web presence that contradicts the stated industry
  • Owners on the application who do not appear in any filing
  • Bank account name that does not match the legal entity

How lenders automate KYB

Manual KYB means opening state websites, searching databases, and pasting screenshots into the file. Kaaj runs KYB inside underwriting: live Secretary of State checks in all 50 states with a time-stamped screenshot in about 2–4 minutes, EIN and owner verification, driver's license authentication in 44 states, web presence, OFAC screening, and lien, judgment, and bankruptcy searches, with 125+ business data points cross-checked against the rest of the credit file.

Frequently asked questions

What does KYB stand for?

KYB stands for Know Your Business: verifying a business customer's legal existence, registration, ownership, and risk before doing business with it.

Is KYB required for lenders?

Banks and other covered financial institutions must identify and verify the beneficial owners of legal entity customers under FinCEN's Customer Due Diligence rule. Non-bank lenders run KYB mainly to control fraud and credit risk. Confirm your obligations with counsel; this is general information, not legal advice.

How long does KYB take?

Database checks return in seconds. Live Secretary of State lookups and document review take minutes when automated and can take hours by hand, especially when a business is registered in several states.

What is the difference between KYB and KYC?

KYC verifies an individual's identity. KYB verifies a business entity, then applies KYC to its owners, officers, and guarantors.

What is a KYB check in lending?

It confirms the applicant business is real and in good standing, matches its application on name, EIN, owners, address, and age, and is free of sanctions and disqualifying records, before credit analysis begins.

Related

Sources: CDD Final Rule (FinCEN)