A bank reference letter serves as a description of a customer’s account history. The reference validates a customer’s credit standing and helps lenders and vendors determine if the applicant can uphold a new financial commitment.
Before a company hires a new employee they’ll often request a list of professional references to help back up their decision. A bank reference letter works in a very similar way, only the bank may be speaking on behalf of their customer to another bank or business — a business looking to extend credit to that customer, for instance.
Since the health of the business is on the line, it’s important to get the details of the letter right. From requesting the letter to knowing what’s included, this guide will have you and your customers starting down the right track.
Rather than requesting information from bank employees via phone or email, Nuvo enables customers to securely connect their business bank accounts to instantly demonstrate their true creditworthiness. Suppliers can use this insight to grant terms with confidence, and avoid the time and effort that comes with obtaining bank references manually.
Reach out to our team to learn more.
Bank reference letters came about as a way to check a person’s or business’s credit standing before credit reports existed. While credit reports have mostly replaced the need for bank references due to their level of detail, bank references can still prove useful.
For example, if a supplier needs to determine the line of credit for a new customer, a bank reference can help inform their decision when other credit history details are lacking.
For a bank reference to effectively serve its purpose, it needs to include key information about the issuing bank and the account holder.
This includes everything you’ll need to verify the identity of the account holder, like their legal name, a government-issued ID number, and their address.
If the bank reference is being provided for a business, it will need to include the business’s legal name, incorporation number, and the country it’s registered in.
The issuing bank will also identify its own information so that it can be easy to follow up with. The bank should cite its name and address, the name of the account manager, and the account manager’s contact information.
This section will identify how old the account is, the type of account, and the balance. Sometimes the balance will represent its current value; other times it will represent the average monthly value.
Your account information will also likely include notable account activity, like any loans the account has received and its repayment history. These details are used as evidence to support whether or not the applicant is worthy of a similar account.
Finally, the bank will provide its endorsement of the account holder. The language is often intentionally broad in nature to protect the bank from a potential lawsuit. Rather than offering a direct yes or no answer, the letter will call out whether you’ve been trustworthy or acted in a respectable manner, leaving the recipient to fill in the blanks.
Banks won’t provide a bank reference letter without the approval of the account holder, so whoever that is will need to be involved. Since bank reference letters are a common occurrence, submitting the application form to the bank as well as any required fee is often all it takes.
Sometimes the business needing the reference can make the request, but the bank will still need the account holder’s permission before taking action. In these instances, the account holder will either need to complete a separate consent form or wait to be contacted by their bank.
Here’s a sample letter that can be used to request a bank reference letter:
We would appreciate it if you could arrange to provide us with a bank reference letter. The following information should be included in the letter:
Please ensure that the letter is delivered on bank letterhead, signed by a bank officer, and addressed to [Company Name]. A copy will not be accepted.
[Signature]
Here’s a sample bank reference letter:
Re: [Customer Name]
We hereby confirm that [Customer Name] of [Full Address] is a customer in good standing of [Bank Name]. Our records state [Customer Name]'s date of birth to be [Date of Birth].
[Customer Name] has maintained a [Checking/Savings] account with [Name of Bank] since [Date]. Average account balances for the past [Number] of months has been [Amount of Checking Balance] and [Amount of Savings Balance].
We provide [Customer Name] with a line of credit of [Dollar Amount]. At this time, there is [Dollar Amount] outstanding. This line renews on [Date]. All loans provided by [Bank Name] have been handled as agreed.
We confirm that [Customer Name] has held their accounts in a respectable manner and is, in our opinion, good for your figures.
