Lender's KYB checklist
How lenders verify a business: the KYB checklist for small business loans
Last updated · Kaaj editorial team
To verify a business for a small business loan, confirm the exact legal entity and its standing on the Secretary of State record, compare the formation date with the stated years in business, check home-state and foreign registrations, match the EIN to the legal name, tie the owners to the filing and verify their IDs, confirm the address and web presence, and check that all of it agrees with the application, bank statements, and tax returns. Screen every application with fast, inexpensive checks and save deeper searches, such as liens and litigation, for deals that survive. Kaaj automates these checks inside underwriting, with live Secretary of State records and screenshots in all 50 states, OFAC screening, and lien, judgment, and bankruptcy searches.
The 10-point KYB checklist
Run the first three on every application. They remove most bad files before you spend money on deeper checks.
Match the exact legal entity
Find the business on the Secretary of State record and confirm the exact legal name, entity type, and state. DBAs and near-matches are where the wrong entity slips in.
Confirm status and standing
Active and in good standing is the baseline. Look closely at entities recently reinstated after dissolution or forfeiture, a pattern sometimes used to revive shell companies.
Compare formation date with years in business
The filing date shows how old the entity is. If the application claims more history, ask why: a new entity for an experienced owner-operator is legitimate, but the owner's history should be documented, not assumed.
Check home-state and foreign registrations
A company formed in one state and operating in another should usually be registered as a foreign entity where it operates. Check both records and flag an entity that is active in one but not the other.
Match the EIN to the legal name
Confirm the EIN belongs to the legal business name. If the EIN is missing at intake, hold the check until it appears on tax returns or other documents rather than failing the file.
Tie the owners to the business
Owners on the application should appear as officers, members, or managers on the filing. Match on more than a name: family members with the same surname often run separate businesses.
Verify the owner's identity
Authenticate the driver's license and confirm name, date of birth, and address agree with the application and other documents.
Confirm the address and web presence
The address should look like an operating location, not only a registered agent or virtual office. An established website, consistent listings, and reviews support a real operating business.
Confirm the industry
Compare the stated industry with the business's footprint and NAICS classification, and check it against your program's restricted industries.
Cross-check the credit file
Business name, EIN, address, and bank account should agree across the application, bank statements, tax returns, voided check, and invoices. Inconsistency is the most common signal of a problem.
What a completed KYB check looks like
Each check is verified or flagged, and the state's record is captured as evidence. In this example the business is real and active, but its formation date contradicts the years in business on the application.
Instant Secretary of State checks vs. live screenshots
Use both: an instant match to screen every application, and a live lookup of the state's website with a screenshot when a deal reaches credit review or needs an audit trail.
| Mode | Speed | Returns | Best for |
|---|---|---|---|
| Instant match | Seconds | Business match, registration status, and registered details | Screening every application at intake; knocking out dead or mismatched entities cheaply |
| Live state-website lookup | about 2–4 minutes | Structured filing data plus a time-stamped screenshot of the state's own record | Files that reach credit review, audit trails, and states where cached data goes stale |
When to run each check
Order checks by cost and by how many bad files they remove. Sanctions screening must happen before funding; many lenders run it at intake because it is inexpensive.
| Check | When | Why |
|---|---|---|
| Secretary of State match | Every application, at intake | Cheapest way to remove dead, mismatched, or fake entities |
| Web presence, address, industry | At intake | Fast signals that the business actually operates |
| EIN verification | At intake, or when the EIN appears in documents | Ties the tax ID to the legal entity |
| Owner ID and identity checks | Before credit review | Confirms the people behind the business |
| OFAC and sanctions screening | Before funding; often at intake | Required before doing business; inexpensive to run early |
| Liens, UCC, bankruptcies, litigation | After initial screening, before approval | More expensive searches reserved for viable deals |
| Live state record with screenshot | Before approval or for the credit file | Audit-ready evidence of standing at decision time |
KYB red flags and what to do
| Red flag | What it may mean | What to do |
|---|---|---|
| Formation date newer than stated years in business | New entity for an existing operator, or overstated history | Ask for the owner's prior entity or operating history |
| Recently reinstated entity | Revived dormant or shell company | Review filing history and recent officer changes |
| Owner not listed on the filing | Broker error, recent change, or a straw applicant | Request operating agreement or updated filing |
| Same surname, different business | Family-run separate entities | Match on date of birth and address, not name alone |
| EIN and legal name do not match | Typo, wrong entity, or borrowed EIN | Verify against tax documents before proceeding |
| Registered agent address only | Virtual presence with no operating location | Confirm the operating address and site |
| Website days or weeks old | Newly created front | Look for listings, reviews, and operating history |
| Active at home, not registered where operating | Missing foreign registration | Ask the borrower to register or explain |
Frequently asked questions
How do I verify EIN and legal business name during application intake?
Match the EIN to the exact legal name using a TIN-matching or EIN verification service, and compare both with the Secretary of State record and the business tax return. Kaaj checks that the EIN and legal name belong together and flags mismatches with the application.
Should Secretary of State KYB be a fast API check or a live screenshot for auditors?
Both. An instant match screens every application in seconds; a live lookup of the state's website returns the current record with a time-stamped screenshot, which Kaaj captures in about 2–4 minutes, for files that reach credit review.
Can we run a cheap SOS-only check before full KYB?
Yes. Run the Secretary of State match on every application and only pay for EIN, owner, and deeper checks on files that pass. Kaaj's KYB is modular so checks can run as this kind of waterfall.
Should lien and OFAC checks run at intake or only after approval?
Sanctions screening must happen before you fund, and because it is inexpensive many lenders run it at intake. Lien, UCC, bankruptcy, and litigation searches cost more, so they usually run after a deal passes initial screening and before approval. Kaaj runs OFAC screening and lien, judgment, and bankruptcy searches and lets you place each one in the waterfall.
How should lenders use the SOS formation date vs. application years in business?
Treat the formation date as the entity's age. If the application claims more experience, verify the owner's operating history separately, for example through a prior entity, licenses, or references, rather than rejecting an experienced owner-operator with a new LLC.
How do KYB tools catch same-last-name family LLCs that are different businesses?
By matching owners on date of birth, address, and ID details as well as name, and by checking which specific entity each person is listed on, so a relative's company is not confused with the applicant's.
If an entity is foreign-registered, which Secretary of State records should I pull?
Both the home-state record where it was formed and the foreign registration in the state where it operates. Flag an entity that is active in one and missing or inactive in the other.
What happens when a state website is down during a live SOS lookup?
Retry, fall back to the instant record for screening, and flag the file so the live record and screenshot are captured before approval instead of silently passing it.
How do equipment lenders verify the individual owner without false person-search matches?
Anchor the search to the owner's ID: authenticate the driver's license (Kaaj supports 44 states) and match name, date of birth, and address together, then confirm the person appears on the business filing.
Run the whole checklist automatically
Kaaj verifies the business and its owners inside underwriting, with live Secretary of State records in all 50 states, OFAC and lien searches, and 125+ business data points checked against the credit file.