KYC checks, a complete guide for businesses

When you apply for a business loan or open a new bank account, lenders often ask you to complete KYC checks. Many business owners wonder why this step is necessary and what it involves. That’s why we’re here to make the process transparent, so you know what to expect and can approach your loan application with confidence.

In this guide, we’ll explain what KYC checks are, why they matter, and how they protect both you and the lender.

What is KYC?

KYC stands for Know Your Customer. It’s a set of processes that financial institutions, lenders, and other regulated businesses must follow to verify the identity of their customers.

This is a key part of the business loan process because it:

• Confirms that you are who you say you are

• Helps prevent financial crime like fraud or money laundering

• Ensures lenders comply with UK regulations, including the Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017

KYC checks are there to keep the loan process secure for both you and the lender.

Is KYC a legal requirement in the UK?

Yes, KYC checks are a legal requirement in the UK. Any business that provides financial services, including banks, lenders, and investment platforms, must carry out KYC checks on their customers. This is part of the UK’s efforts to combat money laundering and terrorist financing. Lenders carry out KYC checks to stay compliant and prevent financial crime.

What do KYC checks involve?

KYC checks for a business loan typically involve three steps:

1. Customer identification: The lender will ask for your details, including:

   • Your full name and date of birth

   • Your company name and registration number

   • Your business address

   • Proof of identity (passport, driving licence)

2. Customer due diligence: This is where the lender verifies your information to make sure everything matches up. They might:

   • Check your documents against official databases

   • Run a credit check on your business to understand your financial health

   • Confirm who owns and controls the company (important for funding decisions)

3. Ongoing monitoring: If you receive funding, the lender may continue to monitor your account activity to spot unusual transactions. This protects your business relationship and ensures compliance over time.​​

What is a KYC checklist?

A KYC checklist is a document or internal process lenders use to ensure they’ve gathered all the required information. This typically includes:

• Proof of identity (passport, driving licence)

• Proof of address (utility bill, bank statement)

• Company registration documents

• Details of directors and beneficial owners

• Business bank statements

• Credit report and financial statements (if applying for funding)

Having these documents ready can help you speed up the process.

Examples of KYC in action

KYC checks come up in several parts of running a business, they’re most common when:

• Applying for a business loan: Lenders check your identity and business credit score before approving funding.

• Opening a business bank account: Your bank will verify your details to protect your account from fraud.

• Working with a new supplier: Some businesses perform KYC on their partners to reduce risk.

Each step is about building trust and making sure everyone involved can trade confidently.

How KYC checks protect you as a business owner

KYC checks are more than just about ticking boxes for regulators. They actually protect you as well. Here’s how:

• Prevents fraud: Verifying identity helps stop criminals from taking loans or opening accounts in your name.

• Keeps the financial system safe: By reducing money laundering and other illegal activity, KYC protects the reputation of the UK economy.

• Builds trust with lenders: Passing KYC checks shows you are a legitimate business, making lenders more confident about approving your application.

How to prepare for KYC checks

The better prepared you are, the quicker you can access funding. Here’s how to get ready:

1. Gather your documents in advance such as ID, proof of address, and company details should be up to date.

2. Check your business credit score. Knowing where you stand helps you understand what lenders will see. You can do this quickly with a free Capitalise account.

3. Keep your records up to date. Make sure Companies House records and bank statements are correct and reflect your most recent information.

KYC vs. AML checks

You’ll often hear KYC mentioned alongside AML checks (Anti-Money Laundering checks). While they’re related, they serve different purposes.

• KYC checks focus on verifying who you are.

• AML checks focus on spotting suspicious transactions and preventing money laundering.

Together, they form the due diligence process lenders must follow.

Applying for a business loan is a big step and KYC checks can sometimes feel like another hurdle in the journey. Our goal is to make this process transparent and straightforward so you can move forward with confidence. By understanding why KYC exists, what documents you’ll need, and how lenders use this information, you can reduce delays and avoid surprises when seeking funding. 

If you’re thinking about applying for a loan, you can apply for funding for free with Capitalise. You’ll get access to 130+ business lenders and support from a dedicated funding specialist to make your journey as smooth as possible.