How to Write a Financial Reference Letter (With an Example)
By Indeed Editorial Team
Published 17 June 2022
The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.
Employees in the financial sector who work in banks or other institutions often develop lasting professional relationships with their clients. One of the services they provide to their clients is financial reference letters that describe a client's financial history. If you work in this field, you can benefit from learning how to write these letters for your clients. In this article, we define the document, explain the reasons a client asks for it, describe how to write one and provide a template and example.
What is a financial reference letter?
A financial reference letter is a document prepared by a bank or other financial institution that explains the financial history of a client. This letter tends to be an unbiased review of clients' interactions with their finances. For example, it may include details about financial responsibility and reliability, the client's ability to repay loans or their competency in developing financial relationships with businesses, partners or other institutions. A verified letter provides additional proof about a client that can confirm both their identity and their financial history. Typically, a banker or accountant writes these letters for their clients.
How to write a financial reference letter
If you work for a financial institution, you may be responsible for writing letters of reference for your clients. It's important to write objective letters that accurately reflect the nature of a person's financial history. Here are the steps for how to write a financial reference for a client:
1. Discuss the purpose of the letter
When your client requests a reference letter, ask them to detail their objectives. Understanding their intentions can ensure that you can help them meet their goal. There's a chance you aren't the best authority for the letter, because of your relationship or limited access to their financial records. If that's the case, recommend someone more appropriate. For example, the branch representative of a bank may recommend an individual's accountant, as that person may know more about employment or tax history.
If you have the necessary knowledge and authority, follow up with detailed questions about how your client hopes to appear to the recipient. Consider what positive aspects of their financial history best represent qualities like stability and dependability. Once you agree to write the letter, you can begin gathering more details.
2. Collect relevant information
Once you understand the intent of the letter, gather whatever documents you require to write the letter. This usually includes bank records, tax documents and recipient details, but it may vary based on the client's objectives for the letter. You may require additional information from your client or another financial institution. Be sure to source your information from formal documents that you can make available upon request. Consider securing this information safely to protect your client's privacy while writing the letter.
3. Write the letter
Consider using a template from a reputable website or your workplace. The main point of the letter is to give a neutral, objective overview of your client from a financial perspective, which is why a template is often sufficient for composing the letter. Here are a few details to include in the letter of reference:
your office address
name of recipient
full legal name of your client
a description of your relationship with the client
a confirmation of the client's financial status
details that support the client's financial status
your official title
4. Verify details with your client
After you finish writing the letter, review its content with your client. There may be some information they prefer to keep private, or the recipient may have a new address. Sometimes, you may provide a sealed reference letter. In this situation, simply relay the information contained in the letter rather than sharing the letter itself. It's important to have accurate details in the letter, since it may have legal implications for you and your institution, depending on the client's circumstances or reasons for requesting it.
5. Proofread and sign before sending
Before you send the letter, proofread the entire document to ensure it is free of spelling and grammatical errors. Correctly spelling the name of your client and the recipient is important for legality and professionalism. Double-check your information, particularly if you're re-using a template from another client. Once you've checked everything else, sign at the bottom above your printed name. Proofreading gives the letter a professional tone, which can strengthen its impact on the recipient.
Reasons to use a financial letter of reference
There are a variety of reasons why a client might request a letter that attests to their positive financial history. Providing a letter can provide another institution with the required information to build a trusting relationship with your client. Here are a few reasons a client may request this type of letter:
Obtain funding from another source
Often, businesses seek funding from multiple sources. If a client received funding from you in the past, they may contact you to verify that they repaid the amount in full. This verification can help them secure funding from another source so they can continue their business endeavours.
Receive a student loan
This type of letter also could be useful to someone applying for a student loan. Student loans are available to undergraduate and postgraduate students, and some lenders may want to be sure that they lend the money to a reliable student. You might provide details about their financial status with your institution regarding consistent repayment of their credit card bill, which demonstrates a positive repayment history.
Rent or purchase property
If a client wants to rent or purchase property, the property owner or the mortgage company may want verification of the buyer's previous financial history. For example, if a client rented an apartment for 10 years, you could provide details about how frequently they paid rent on time. This shows the property owner that they can rely on your client to make rent or mortgage payments on time each month.
Enter a business deal
When a client prepares to enter into a business deal, their partner may want proof that they can trust your client financially. By providing a statement of the client's positive financial history from a business perspective, the potential business partner might feel more confident about agreeing to a deal with your client. In this case, it's important to ensure you discuss with your client the type of information they want you to include in the letter of reference.
Financial reference letter template
Here's a template you can use to write a letter of reference about one of your client's finances:
[Name of the institution]
Dear [name of recipient],
I am writing this letter on behalf of [client's full legal name] to verify their positive financial standing with our institution, [name of institution]. I've worked alongside [client] as [description of the relationship with the client]. The client maintains a good financial status in the following ways: [details about the client's financial status].
I would encourage you to accept [client's full legal name] for [purpose of the letter] because they have proven their ability to maintain a strong financial status. Since [client] isn't likely to become a financial burden, moving forward would be advantageous. If there's any information you need me to confirm, please get in touch using the following contact details:
Email: [your professional email address]
Phone: [your professional phone number]
[Your printed name and title]
Financial reference letter example
Here's an example of a letter of reference for a client using the template provided above:
Vision Standard Bank
15 October 2022
Dear Ms Huang,
I'm writing this letter on behalf of Sarah Willow Chen to verify her positive financial standing with our institution, Vision Standard Bank. I've worked alongside Ms Chen as her financial advisor for the past seven years. The client maintains a good financial status in the following ways: Ms Chen frequently makes payments promptly and maintains a steady stream of income from her work as an entrepreneur.
I would encourage you to accept Ms Chen's application for a moderate business loan to begin her new endeavour because she has proven her ability to maintain a strong financial status. Since Ms Chen isn't likely to become a financial burden, moving forward would be advantageous. If there's any information you need me to confirm, please get in touch using the following contact details:
Phone: +65 9273 2957
Senior financial consultant
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