A new federal rule aimed at thwarting money laundering will go into effect in May and could impact how your business applies for and secures financial products like loans and credit cards.

The “beneficial owner” rule, officially called the Customer Due Diligence Requirements for Financial Institutions rule, is aimed at helping banks better understand precisely who is behind the business entities they are banking by collecting more information about the people associated with these entities. By doing so, the government hopes to reduce the estimated $2 trillion laundered around the globe annually.

When the beneficial owner rule goes into effect May 11, financial institutions covered by it will have to start identifying and verifying all “beneficial owners” of business entities who want to do business with them, including applying for business credit. So who’s a beneficial owner? In a nutshell, anyone who own at least 25% of the business, either directly or indirectly (more on that in a minute). What this means if you’re operating as a limited partnership, LLC or other type of business structure involving more than one owner, you’ll now have to consider whether you need to include the personal information of any other co-owners on the application.

Here’s what you need to know about these new regulations.

What Does the ‘Beneficial Owners’ Rule Mean?

“Covered financial institutions are not presently required to know the identity of the individuals who own or control their legal entity customers,” the published rule states. “This enables criminals, kleptocrats, and others looking to hide ill-gotten proceeds to access the financial system anonymously. The beneficial ownership requirement will address this weakness and provide information that will assist law enforcement in financial investigations, help prevent evasion of targeted financial sanctions, improve the ability of financial institutions to assess risk, facilitate tax compliance, and advance U.S. compliance with international standards and commitments.”

Going forward, that means you’ll need names, birth dates, Social Security numbers, home addresses and percent of ownership for anyone deemed a beneficial owner. Keep in mind their credit information is not pulled, but their records are kept on file for informational purposes. So, if one of your business owners has a personal history of late payments or a bankruptcy on their credit report, it won’t impact your ability to secure any financing you may be looking for. You can check your personal and business credit for free every month at Nav. 

How Do I Determine Who Is a Beneficial Owner?

Exactly who is considered a beneficial owner depends upon the structure of your business entity and how much of a percentage of the company associated individuals own. For general purposes, though, it includes direct owners who own at least 25% of the company; the owners of any entities that own a portion of the company so long as the individuals each have at least a 25% stake in the company); and so on. To save your own valuable time, it’s a good idea to have your accountant or banker review your business structure before applying for any banking services in order to determine who will need to be included in any financial paperwork going forward.

Will Steps for Getting a New Loan or Credit Card Change?

The new rule will not change any aspect of applying for things like a loan or a business credit card, excepting the additional paperwork that may be necessary. It will still be a good idea to go through the necessary steps to ensure you qualify for a new business loan, for example, including:

• Identifying lenders you want to work with along with their requirements to qualify.
• Having a business plan in place.
• Knowing your personal credit score and what is in your credit report.
• Knowing your business credit scores.
• Identifying any necessary collateral sources.

And when it comes to applying for a new credit card, it’s a good idea to check your credit report for errors before applying. While you’re at it, it’s also good to make sure your credit utilization is low and that you’ve maintained a timely payment history as these are factors that can affect whether you’re approved or not.

Whatever financial tools you end up applying for in the future as an owner in a business entity, it’s always a good idea to do your own due diligence beforehand, gathering all the important information about your business, including the legal name, tax ID, address, revenues, number of employees, etc. And, as always, make sure to review your paperwork for accuracy before submitting it.