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Small Business Background Checks: A Complete Guide [2023]

small business background check service

Small businesses face pressures in today’s competitive labor market to quickly find and hire the right people.

However, you still need to take steps to ensure that potential hires are qualified, trustworthy, and competent.

Did you know that 94% of businesses report they conduct at least some type of background check on job applicants?

Small business background checks help protect the safety of your customers, employees, and your business reputation.

At iprospectcheck, we regularly conduct background checks for small businesses across the U.S. and have written this guide as a resource for business owners.

Let’s get started.

Why are Background Checks Important for Small Businesses?

Background checks for small businesses are important for the following reasons.

1. Mitigate risks of employee theft and fraud

Background checks show whether an applicant has a criminal record.

This helps businesses screen out candidates who have previous theft convictions, thereby reducing the risk of internal thefts.

According to the Association of Certified Fraud Examiner’s 2022 Report to the Nations, businesses with the fewest employees in 2021 reported the highest median losses from internal thefts and fraud of $150,000.

While a large corporation might be better equipped to absorb losses caused by employee thefts, these types of losses can force small businesses to close.

2. Ensure candidates are qualified for their jobs

Background checks show whether an applicant has the qualifications and experience needed for their jobs.

Hiring an unqualified applicant could result in productivity issues and potential liability.

3. Avoid substantial expenses caused by hiring the wrong people

Hiring the wrong people for your open positions can lead to higher turnover rates and costs associated with getting new hires up to speed.

4. Maintain a safe work environment

Comprehensive pre-employment screens provide insight into whether an applicant exercises safety or if they tend to be careless.

Hiring careful applicants can help to protect the safety of your work environment

5. Reduce liability risks

Background checks can reduce the risk of lawsuits filed against your business for negligent hiring or retention of an incompetent or unsafe employee.

What Shows up on a Small Business Background Check?

What shows up on a small business background check varies based on the industry in which you operate.

However, most small businesses ask for the following types of searches:

  • Criminal history
  • Employment verification
  • Education verification
  • Pre-employment drug tests
  • Professional license verification if applicable
  • Identity verification

Let’s take a look at what might appear on a few of these types of reports.

Criminal History

A criminal background check for employment shows whether an applicant has a criminal conviction or a pending criminal matter.

If an applicant has a criminal history, the following information will appear:

  • Offense date
  • Nature of offense
  • Severity of offense (felony/misdemeanor)
  • Disposition if available
  • Disposition date if available
  • Sentence information if available

If your business is located in a state that allows people to expunge certain criminal convictions from their records, you won’t see information about expunged convictions.

Employment Verification

Employment verification helps you confirm what an applicant has reported about their former jobs.

Employment verification reveals the following information about each of an applicant’s past jobs:

  • Employer’s name and address
  • Dates of employment
  • Job titles and positions

Education Verification

Education verification confirms whether an applicant has been honest about their educational attainment.

On an education verification check, you will see the following information:

  • School names/addresses
  • Dates of attendance
  • Whether any diplomas, degrees, or certificates were conferred

Professional License Verification

Businesses that hire employees for jobs requiring licenses typically request professional license verification as a part of their background checks.

Professional license verification reveals the following information:

  • Type of license
  • Issuance date
  • License status
  • Expiration date
  • Discipline/sanctions against the license
  • Suspensions or revocations

Pre-Employment Drug Screens

Many employers require pre-employment drug tests as a condition of employment to maintain a safe work environment.

A pre-employment drug screen will show whether an applicant has recently used any of the following drugs:

  • THC (marijuana)
  • Cocaine
  • Opiates
  • Amphetamines
  • PCP (phencyclidine)

Background Check Laws Small Businesses Should Know

It’s both important to conduct employment background checks and to understand the laws that govern them.

Violating background check laws could expose your company to substantial penalties and potential liability.

Federal Background Check Laws

Fair Credit Reporting Act (FCRA)

The FCRA is a consumer privacy law that controls both how consumer reporting agencies (CRAs) can collect, retain, and report information and what the recipients of the information can do with it.

This law governs both background check providers and employers who receive background check reports.

If you receive a background check report that contains negative information about an applicant, you must go through the adverse action process before you can base an adverse employment decision on the information contained in the report.

Title VII of the Civil Rights Act of 1964 (Title VII)

Title VII of the 1964 Civil Rights Act prohibits employers from discriminating against applicants and employees based on their protected status.

The Equal Employment Opportunity Commission (EEOC) enforces this law. The agency has issued guidance about what employers should do when a background check report reveals an applicant’s arrest or criminal conviction.

If you learn that an applicant has a criminal record, you must assess the conviction as it relates to the job for which the applicant is being considered before deciding not to hire them.

State Background Check Laws

Many states have laws that govern background checks. These laws vary, so you will need to consult your legal counsel to learn about the laws that might apply in your state.

A growing number of states and cities have passed ban-the-box laws. These laws govern the point during the hiring process when you can ask about criminal history information and/or conduct background checks.

How to Run a Background Check on an Applicant

There are two ways small businesses conduct background checks, including do-it-yourself (DIY) checks and partnering with a reliable background check provider.

1. DIY Background Checks

Some small businesses conduct DIY background checks on applicants by sending requests for information to several state agencies, former employers, and educational institutions.

They might also call the references an applicant has listed on their resume or perform social media and Google searches to gain information.

DIY background checks can pose the following problems for small businesses:

  • Time-consuming – It might take you a couple of weeks to gather all the information you need to make a hiring decision, and most businesses can’t afford a long hiring process.
  • Unreliable data – You also might receive inaccurate, outdated, or incomplete information about an applicant’s background.
  • Non-compliant – Some of the information you receive might not comply with relevant background check laws, potentially exposing your business to liability.

2. Working with a Provider of Small Business Background Check Services

A better way to conduct background checks is to work with a reliable background check provider like iprospectcheck.

We provide background checks for small businesses in all industries and stay up-to-date on the relevant laws and regulations to return FCRA-compliant reports to our clients.

We have extensive resources and use advanced research techniques to quickly return background check reports to our clients. In many cases, we can provide reports in a matter of hours.

Recommended Small Business Background Check Packages

At iprospectcheck, we offer convenient background check packages at varying price points for small businesses that require 50 or more checks per year.

The package that works for you will depend on your business and your needs.

You can choose a package that offers some or all of the following types of searches:

We also have other types of background search products available that you can add on based on your business and industry, including DOT-compliant background checks, motor vehicle record checks, and more.

To get a complimentary consultation, give us a call at (888) 509-1979

What Is the Best Background Check Service for a Small Business?

The best background check service for small businesses should have several key characteristics.

Here are some of the factors to look for in a background check provider.

1. Fast Turnaround Times

A good background screening partner should offer fast turnaround times so that you can onboard quickly.

At iprospectcheck, we provide fast reports to our clients so that you can hire the talent you need quickly in a tight labor market.

2. Accuracy

The best background provider for your business should provide information you can trust.

A background screening provider’s accuracy can help you make confident hiring decisions and protect you against potential liability.

3. Affordability

When you are searching for the right background check partner, you will appreciate iprospectcheck’s affordable pricing.

With us, you can pick only the reports you need so that you don’t have to pay for unnecessary reports.

4. Compliance

The best background check company should stay up to date with all changes in the laws as they occur so that they can remain compliant.

We remain current will all changes when they happen to ensure that our reports are always legally compliant.

5. Comprehensive

When you choose a background screening company, you should look for one that offers comprehensive services.

At iprospectcheck, we offer many types of background checks and other services you might need, including drug screening.

6. USA-Based Customer Support

Your background check provider should have USA-based support.

This allows you to speak to someone quickly instead of having to jump through hoops just to get help.

7. Data security

When you order background checks, the provider you choose must have strong data security to protect the safety of your private information and that of your applicants.

At iprospectcheck, we use the highest level of encryption technology to keep your information safe.

How to Develop a Background Check Policy for Your Small Business

If you intend to conduct background checks at your small business, you need to have a written background check policy in place.

Creating a policy for background checks helps to ensure that your business will maintain consistency and fairness in the process.

1. Make Your Policy Apply Company-Wide

Your policy should apply company-wide at your business, and it should be applied consistently to all applicants.

2. Ensure Your Policy Complies With All Relevant Laws

You should also make sure that your policy complies with all relevant state and federal laws, and you should regularly review and update the policy so that it accurately reflects legal changes.

3. List the Types of Background Checks and Who Will Undergo Them

Include a list of the types of background checks you will conduct on applicants and/or current employees.

Make sure your background check policy only includes the types of background checks that are legally authorized in your state.

It should also address when in the hiring process they will be conducted and who will undergo them.

4. Include the Responsibilities of the Hiring Managers

Make sure you list the responsibilities of your hiring managers, including the need to disclose your intent to conduct background checks and obtain written consent from your applicants or employees before they are conducted.

5. Provide Copies to Everyone

Once you have drafted a background check policy, make certain that everyone in your business receives a copy so that they understand your requirements.

iprospectcheck Is Your Trusted Partner for Small Business Background Checks

Conducting small business background checks can protect your company from harm, losses, and reputational damage.

Background checks can also help to keep your employees and your customers safe.

At iprospectcheck, we provide comprehensive background check services to small businesses in every state.

To learn more about the employment screening services we offer or request a free consultation, call us today: (888) 509-1979

DISCLAIMER: The resources provided here are for educational purposes only and do not constitute legal advice. Consult your counsel if you have legal questions related to your specific practices and compliance with applicable laws.

Know Before You Hire

About the Author
Matthew J. Rodgers

Matthew J. Rodgers

Matthew J. Rodgers is a highly accomplished business executive with over 30 years of experience providing strategic vision and leadership to companies ranging from the fortune 500 to iprospectcheck, a company which he co-founded over a decade ago. Matthew is a valued consultant who is dedicated to helping companies create and implement efficient, cost effective and compliant employment screening programs. Matt has been a member of the Professional Background Screeners Association since 2009 . When not focused on iprospectcheck, he can be found spending time with his family, fly fishing, or occasionally running the wild rivers of the American west. A lifetime member of American Whitewater, Matt is passionate about protecting and restoring America’s whitewater rivers.