Know Your Business (KYB)
Last updated October 1, 2026
Know Your Business (KYB) is the process of verifying a business borrower and the people who own and control it. It is the business version of Know Your Customer (KYC). The lender confirms the company exists and identifies the real people behind it.
A typical KYB check covers:
- The entity: legal name, state of formation, status with the Secretary of State, address and employer identification number (EIN).
- The business: industry, website, time in operation, and whether its activity fits the loan request.
- Beneficial owners: each person who owns 25% or more, plus one person with significant control, such as the CEO or managing member.
- Public records: liens, Uniform Commercial Code (UCC) filings, judgments and bankruptcies.
- Sanctions: Office of Foreign Assets Control (OFAC) screening of the company, its owners and any guarantors.
In the US, banks and credit unions follow the customer due diligence rule from the Financial Crimes Enforcement Network (FinCEN), which requires them to identify and verify the beneficial owners of business customers. On February 13, 2026, FinCEN said institutions no longer have to repeat that work automatically at every new account. They must still do it when a business first opens an account, when new facts call earlier information into question, and as their risk-based procedures require.
There is no federal registry to lean on. In March 2025, FinCEN exempted US-formed companies from reporting their owners under the Corporate Transparency Act, and it made that exemption permanent in August 2026. Lenders must collect ownership details from the borrower.
Why it matters for lenders
Businesses are a common route for fraud and money laundering because a company can hide who is behind it.
KYB also supports the credit decision. Knowing the owners tells the lender whose credit to pull, who should sign a personal guarantee, and whose other debts matter. A lien or judgment found during KYB can change the deal.
How it works in practice
A lender receives an equipment loan application from a limited liability company (LLC) that lists two owners. The analyst pulls the state filing and finds a third member on the latest annual report. Asked to explain, the applicant confirms the third member owns 30%. All three owners are identified, verified and screened.
A UCC search shows another lender's lien on all business assets, which must be resolved before closing. Each result is saved on the loan with its source and date.
When KYB results are scattered across portals and email, nobody can show later what was checked. For a repeat borrower, verified ownership already on file can also save work on the next loan.
Related terms
Know Your Customer (KYC)
Know Your Customer (KYC) is the process of confirming a borrower's identity and understanding enough about them to judge the risk of lending to them. For US banks and credit unions it is required by the Customer Identification Program rule. Many nonbank lenders follow similar checks because partners and investors require them.
AML and the Bank Secrecy Act (BSA)
The Bank Secrecy Act (BSA) is the main US law for detecting and reporting money laundering and terrorist financing. Anti-money laundering (AML) programs are the controls institutions use to meet it, including customer due diligence, monitoring and suspicious activity reports. FinCEN, part of the US Treasury, administers it.
OFAC Screening
OFAC screening is checking borrowers, owners, guarantors and other parties against the US sanctions lists kept by the Treasury's Office of Foreign Assets Control. OFAC rules apply to every US person and company, not only banks, and liability is strict. Lenders screen at onboarding and keep screening while the loan is open.
Personal Guarantee
A promise by an individual, usually a business owner, to repay a business loan from their own assets if the business cannot. It gives the lender a second source of repayment and ties the owner's own finances to the loan's success. Guarantees can be unlimited or capped, and they are standard in small business and many commercial real estate loans.
UCC-1 Filing
A public notice, called a financing statement, that a lender files with a state office to record its claim on a borrower's business assets. Filing a UCC-1 is the usual way to perfect a security interest, which sets the lender's priority over later creditors. In most states a UCC-1 lasts five years unless the lender files a continuation.
See how lenders put this into practice
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