Will a lender call my bank, my landlord or my customers?

Bank verification

Usually the account, the ownership and sometimes balance or average balance information — occasionally on a call to your bank, more often via a verification of deposit form or a read-only data connection. Your bank will not disclose it without authorisation, which is why the application contains one.

If someone asks you for online banking credentials rather than an authorisation or a read-only connection, that is a separate issue: see do I have to give a lender my bank login.

Landlord verification

Common for restaurants, retail, salons, clinics, gyms and workshops. The lender confirms you occupy the premises, that rent is current, and how long the lease runs. Where collateral sits on leased premises they may also want a landlord waiver, which is a document rather than a phone call and takes longer.

Tell your landlord to expect the call. A landlord who does not recognise the caller and refuses to confirm anything creates a stipulation you then have to clear.

Site inspections

A visual confirmation the business exists and operates: sometimes a third-party inspector, sometimes photographs, occasionally a video call. Common on larger advances, on equipment finance where the asset must be seen and its serial number recorded, and on inventory-secured deals. It is normally brief and the report is a handful of pages.

Field exams

A different and heavier thing. A field exam is a collateral audit used in asset-based lending and larger factoring facilities. The examiner tests the receivables ledger against invoices and proof of delivery, measures dilution, checks inventory records, reviews payables and taxes, and ties the subledgers to the general ledger and back to the financial statements.

Two things to know: it is usually paid for by the borrower and the cost belongs in your calculation of the facility's total cost, and on a revolving facility it repeats periodically for the life of the deal, not just at the start.

The verification that affects your customers

In invoice factoring, the factor generally verifies that invoices are genuine, delivered and undisputed. That can mean contacting your customer's accounts payable department directly.

Whether they are told about the arrangement depends on the facility. In notification factoring your customers receive a notice of assignment and pay the factor. In non-notification facilities they are not told, though verification may still occur in a lower-key form.

Establish before you sign: will my customers be contacted, what will they be told, in whose name, and how often? For businesses selling to large corporates this is routine and unremarkable. For a business whose customers would read it as distress, it is a material term and you should treat it as one.

Reference and trade checks

Larger facilities may include supplier references, a call to your accountant, or trade credit checks. Warn anyone you list. An unprepared reference who says "I'd have to check who they are" is not a good moment for your file.

What a bank verification form actually asks

Worth knowing so nothing in it surprises you, and so you can tell your bank what is coming.

A standard verification asks the bank to confirm the account exists, who is authorised on it, when it was opened, the current and average balances over a stated period, whether there have been overdrafts or returned items, and sometimes whether any other obligations to that bank exist. It is completed by a bank officer and returned to the lender directly rather than through you, which is the point of it.

Two things to check. Your bank may charge a fee for completing one. And the form usually asks for information across several months, so the answer reflects the period, not the day — clearing an overdraft the week before does not change what the form reports.

Read-only data connections

Increasingly the request is not a form but a link to connect your bank account through an aggregation service. It is faster and it removes the stipulation, and it deserves a moment's thought first.

Ask three things: what data is retrieved and over what period, how long access persists after funding, and how to revoke it. Some connections are a one-time pull of transaction history. Others remain live and continue reporting your balances to the funder for the life of the facility, which is a meaningfully different thing to agree to. Revocation is usually through your bank's own connected-apps settings rather than through the funder.

Note the distinction from handing over online banking credentials. A read-only connection through an aggregator is a normal request. Your username and password are not, and no legitimate verification requires them.

What a field exam costs you

Since field exams are charged to the borrower and repeat, they belong in your cost of the facility rather than in a diligence budget.

Ask for the expected frequency, the day rate, the estimated days, and whether there is a cap on annual examination costs. A cap is a reasonable request and lenders do agree to them.

Prepare the people who will get the call

Every verification has a human on the other end who can turn a routine confirmation into a stipulation by hesitating.

Tell your landlord, your accountant and any trade reference you list that a call is coming, who from, and roughly when. Give them the lender's name, not just "a finance company". For invoice verification, decide in advance who at your customer should receive the contact — the accounts payable contact, not the person who signs your work — and tell them what to expect if the facility is a notification one.

The rule that covers all of it

Ask at term sheet stage: who will you contact, in what order, and what will you say? Verification is normal and no reasonable lender minds being asked. Being surprised by a call to your biggest customer is avoidable and worth avoiding.