.jpeg)
Before working with business clients, you first need to confirm that they are legitimate businesses and not shell companies created to hide illegal activity.
But the process of verifying businesses can be exhausting. Funders spend more than 250 hours each month on manual verification when processing around 5,000 applications. Each check requires time, patience, and attention to detail.
To make things harder, there are 50 different state websites, each with its own design, rules, and search tools. Your team has to navigate them all just to confirm that one company exists.
This guide breaks down how the Know Your Business (KYB) process works and why it matters for funders. You’ll learn the steps involved, the challenges it solves, and how automation tools like Heron make KYB faster, more accurate, and far less stressful.
What is Business Verification?
Business verification is the process of confirming that a company is real and operates legally. In business lending, this step helps you understand who you are funding and protects you from unnecessary risks.
It means reviewing a business’s background, ownership, and operations by looking at documents such as registration papers, tax records, and financial statements.
This process also supports anti-money laundering (AML) compliance, helping you meet regulatory standards while keeping your reputation safe.
With modern tools, especially AI-based verification systems, you can complete these checks faster and more accurately. They analyze large sets of data, cross-check public records, and flag inconsistencies in real time.
The Know Your Business Process
The KYB verification process allows you to understand how a company operates, who owns it, and how it manages its money.
For funders, this process reduces exposure to financial crime, helps meet regulatory requirements, and supports safer business relationships.
Initial Data Collection
This step focuses on gathering key information about the business before any funding decision is made. You collect details like the legal name, address, registration records, tax information, and ownership structure.
Funders also need to identify the ultimate beneficial owners (UBOs) who hold significant control or a financial interest in the company.
This helps you see who truly manages the business, especially when ownership is split among several entities.
Verification
Once you have the data, you must perform KYB checks by confirming that the details match official records.
You can cross-reference information using government registries, third-party databases, and public records.
This helps verify if the business operates legally and is not involved in suspicious or unreported cash transactions.
Risk Assessment
After confirming authenticity, you analyze the business’s background to identify higher risk factors. This includes looking at its industry, financial history, and geographic location.
For example, a company that often deals with large sums of cash or operates in high-risk regions may need deeper checks.
Strong KYB compliance practices help you detect these risks early and avoid potential problems in the future.
Ongoing Monitoring
KYB does not end after approval. You still need to keep track of the business over time to stay compliant and reduce risk. Ongoing monitoring means reviewing the company’s information regularly to see if anything has changed, such as its ownership, management, or business activity.
Ongoing monitoring also keeps your data fresh. It lets you respond faster to regulatory updates and maintain trust with your business clients.
Many funders now use automated business verification tools that send alerts when a company’s registration, structure, or financial standing changes.
The Importance of KYB Business Verification in Lending
Before approving funds, it’s important to know exactly who you’re dealing with. Let’s talk about why proper KYB business verification matters for funders and how it helps reduce risk.
Staying Compliant with Regulations
For regulated companies, compliance is a constant responsibility. Strong KYB verification helps your compliance teams meet national and international laws tied to anti-money laundering and counter-terrorism financing (CTF) regulations.
These KYB procedures involve checking ownership through official corporate registries, verifying the company’s details, and documenting every step. By following the right process, you avoid fines, audits, and the loss of partner trust.
Reducing Risk Before Funding
Performing enhanced due diligence helps you see beyond surface details. Reviewing ownership, shareholder data, and corporate background gives you a clear picture of how the business operates.
This process helps you identify high-risk companies, including those hiding illegal financial transactions.
Each verification step reduces your risk exposure, protecting your fund from fraud and long-term losses.
Making Confident Funding Decisions
Accurate verification helps you fund the right opportunities. When you know who owns and manages a company, you can assess repayment strength and overall credibility.
For instance, if ownership is unclear or key documents are missing, you can take a closer look before proceeding.
Careful verification keeps your underwriting accurate and reduces unnecessary financial risk.
Building Trust with Business Partners
A transparent process creates stronger business relationships. When you verify every business partner thoroughly, it shows you value honesty and compliance.
Funders who follow consistent KYB practices are more likely to attract trustworthy clients. Ongoing reviews also show commitment to transparency, which strengthens long-term partnerships.
Improving Efficiency with Automation
Manual checks take time and often slow your funding cycle. Automated KYB processes change that.
They scan registries, verify ownership, and update records automatically. This makes onboarding business customers faster while keeping accuracy high.
Automation also supports continuous monitoring, helping you stay compliant and informed as your funded companies grow and change.
Explore the Complete Suite of Heron’s KYB Tools
If your team manages a high volume of merchant cash advance deals, you know how much time goes into manual data checks and paperwork.
Heron is here to fix that. It helps MCA funders and brokers grow deal flow without adding more staff. The platform removes repetitive work like application intake, bank statement reviews, and funder emails by sending clean, structured data straight into your CRM within seconds.
While Heron helps scrub data from submitted documents, we know that this data is only half the story. You have to look deeper than the documents they send, or you risk funding a business that isn’t what it claims to be.
Heron’s KYB automation tools let you verify a business from every angle: official registration records, court filings, and even online presence.
Your team no longer wastes time researching or cross-referencing data. Instead, they make confident, data-backed funding decisions quickly and accurately.
Security of State Verification
Heron’s Secretary of State (SOS) Verification tool turns slow, manual checks into instant results.
Underwriters no longer need to spend 5-10 minutes per deal reviewing corporate documents or verifying business licenses across 50 state websites.
For funders handling about 5,000 applications each month, that’s more than 250 hours saved and around $10,000 in labor costs reduced.
Heron connects directly to Secretary of State systems in all 50 states and D.C., delivering real-time data instead of outdated records. If a company’s business registration status changes, such as being dissolved, Heron identifies it right away.
The platform’s intelligent matching system recognizes naming differences like “ABC Inc.” versus “ABC Incorporated” with 98% accuracy. It delivers sub-second results and automatically provides timestamped screenshots for compliance.
Beyond verification, Heron’s system captures key data such as registration details and status updates.
With everything in one place, underwriters can quickly confirm corporate documents, check business license validity, and make confident decisions without wasting time on repetitive work.
Courts Records Search
Imagine this: you approve a deal that looks perfect, with steady revenue, clean statements, and strong references.
Weeks later, the borrower defaults, and the funds are gone. After a closer look, you find lawsuits that were publicly available but missed during manual checks.
Underwriters spend 15 to 20 minutes per deal searching court websites, testing name variations, and saving screenshots. For teams handling 1,000 applications a month, that means over 300 hours lost to repetitive work.
Even with that effort, manual checks still miss 30% of lawsuits, costing funders about $85,000 per missed case.
Heron’s Instant Court Search tool fixes this with a streamlined process that finds what others miss. It connects to federal and state court databases in one system, automatically checking both the business and its owners.
Results appear in 5 seconds, showing any lawsuits, judgments, or filings that could affect the company’s legal standing.
This tool gives underwriters everything they need in seconds. It offers complete coverage, catches what manual searches miss, and helps transform your bottom line by reclaiming 300+ analyst hours monthly and preventing $85,000 losses from hidden lawsuits.
Web Presence Verification
Underwriters used to spend over 3 hours a day checking websites, reviews, and social media. Now it takes under 10 seconds.
Heron’s Web Presence Verification gives funders a full digital view of a business before approval.
The tool validates business legitimacy through online footprint analysis across websites, social media, and public directories. It confirms that the company operates within its stated industry and maintains an active, trustworthy presence.
Heron checks 10 to 15 online sources per application in one API call, revealing what bank statements cannot. For example, 45 one-star Yelp reviews in 60 days or a Google rating drop from 4.5 to 2.1 can signal a failing business long before the numbers do.
It compiles verified details like address, website, phone, and email, then summarizes website content to confirm real operations. It also checks related media coverage and identifies key individuals linked to credible public sources.
The system screens for adverse media and flags legal or reputational risks tied to owners or businesses.
See how fast your team can verify a business's online presence. Book a demo of Heron today!
Credit Bureaus
Heron connects with credit bureaus to give funders instant access to the financial data they need to make faster and more confident decisions.
The system connects with major reporting agencies to pull credit scores, payment histories, and financial risk indicators within seconds.
The feature gives your team insight into a company’s past financial activities, showing how it manages debt, makes payments, and handles obligations. These details help you assess reliability and identify early signs of potential risk before approving a deal.
Heron also helps your organization remain compliant with regulatory standards. It automatically flags irregular patterns, including scrutinizing foreign transactions or unusual credit activity that might require additional checks.
With reliable, real-time data from established credit bureaus, your team can evaluate risk quickly, protect your portfolio, and fund with greater confidence.
NAICS Database
Understanding what industry a business operates in is key to making smart funding decisions. Without accurate classification, funders can miss industry-specific risks or overlook regulatory restrictions that impact deal quality.
Heron’s NAICS Database automates industry identification through an AI-powered classifier that achieves 97.56% accuracy in detecting restricted or high-risk sectors.
It automatically matches each business to official NAICS and SIC codes, giving funders a clear view of where the company fits within its market.
The system includes industry restriction lists, allowing you to set custom rules that instantly flag or block prohibited industries before underwriting begins.
Each business record connects classification data with detailed sector insights, showing how the company compares to others in its field. Funders can instantly identify sectors that require closer review or have unique regulatory demands.
With Heron’s NAICS Database, you gain a standardized, automated, and policy-safe view of every business you evaluate, helping your team move faster while reducing risk and improving decision accuracy.
DataMerch Lending History Integration
Heron’s new DataMerch Lending History integration gives funders direct access to over 100,000 merchant records from the alternative lending space. This connection reveals real payment behavior, defaults, and high-risk activity that traditional credit reports fail to capture.
The system provides real-time insight into slow payments, suspicious patterns, and past defaults, helping underwriters identify risky businesses early.
Each record includes detailed lending history across multiple funders, allowing your team to see whether a business has previously failed to repay or triggered warning flags.
With this integration, funders can instantly spot applicants who have burned other lenders and prevent repeat losses.
Combining Heron’s verification tools with DataMerch’s lending data helps teams reduce default rates, strengthen portfolio quality, and approve only trustworthy businesses.
Heron makes these insights available in one platform, allowing underwriters to make confident, informed decisions before funding begins.
Address Validation
Getting an address wrong can cause more problems than you might expect. A small typo or a missing detail can slow down deals, create compliance issues, or even lead you to verify the wrong business.
As a funder, you need to know exactly where a company operates and confirm that its location makes sense for its industry and market.
Heron’s Address Validation handles that automatically. It checks each address against postal databases, fixes errors, and confirms that the location is real. The feature also adds geocoding data, giving you the exact map coordinates so you can see where a business is based and how it fits within your portfolio.
Beyond confirming accuracy, Heron adds demographic details that help your team build stronger risk profiles.
You can see if a business operates in a high-risk area, identify patterns across locations, and better understand the environment around each company.
With Heron, address checks become quick and dependable. Your team spends less time fixing data and more time focusing on funding decisions backed by verified information.
Conduct KYB Checks on Business Entities Easily with Heron
Running business checks can take hours when you are reviewing multiple applications every day.
Heron simplifies that process by bringing together all the key components of KYB verification in one place. You can confirm company details, ownership, and compliance status without switching between different tools or databases.
Your team no longer needs to dig through stacks of business documents or rely on outdated spreadsheets.
With automated KYB checks, Heron collects and verifies real-time data from trusted sources, giving you a complete and accurate view of each business in seconds.
The system is designed to help funders meet compliance requirements and follow current business regulations without slowing down the underwriting process.
All KYB data is organized, current, and easy to review, helping you make informed funding decisions while reducing manual work.
Heron gives your team what it needs to work faster and smarter. You save time, lower risk, and fund legitimate businesses with confidence.
FAQs About KYB Business Verification
What is a KYB verification?
KYB verification, or “Know Your Business,” is the process used to confirm a company’s identity and ownership.
It helps verify corporate structures, check business information, and confirm that potential business partners are legitimate before entering into any agreements or continuing with business onboarding.
How do I verify if a business is legit?
To check if a business is legit, look up its registration details, verify its licenses, check its connection with other business entities, and see if it complies with regulations.
You can also research reviews, confirm physical addresses, and cross-check their details with other financial institutions.
How long does KYB verification take?
KYB verification can take anywhere from a few hours to several days, depending on how quickly the company submits accurate business information and supporting documents. Larger corporate structures may take longer since more details must be checked.
However, automation tools like Heron can speed this up by instantly processing data and verifying records without manual review.
