Summary
- Your NAICS code identifies your industry and affects your ability to qualify for financing.
- Ensure your code accurately reflects your primary business activity to avoid funding or compliance issues.
- You can verify your NAICS code using the U.S. Census Bureau’s online search tool.
- Check your business credit reports regularly to ensure your NAICS code is correct.
What Are NAICS Codes?
NAICS codes (North American Industry Classification System) are six-digit codes used by government agencies, lenders, insurance companies, and analysts to classify businesses by industry. They replaced the older SIC system in 1997 and are updated every five years.
What Are IRS Business Codes?
The IRS uses NAICS codes as Business Activity Codes on tax returns. Examples include:
- Schedule C (sole proprietors & contractors) – Line B
- S-Corporations – Form 1120-S, Item B
- LLCs – Depending on how the LLC elects to be taxed
These codes help categorize your business activity for tax and statistical purposes.
Why Business Codes Matter for Small Business Financing
Nearly all lenders factor industry risk into their financing decisions. Some industries are considered higher risk and may struggle to obtain loans, lines of credit, or merchant accounts.
Your code may appear on your business credit reports, so accuracy matters.
How to Find Your Business Code
Use the U.S. Census Bureau NAICS lookup tool and enter keywords describing your main business activity.
Example search: "tree removal" → NAICS 561730
How to Select the Correct Code
Choose the code that best reflects your primary revenue-generating activity. If you cannot find an exact match, choose the closest accurate description.
How NAICS Codes Are Structured
NAICS codes use a six-digit hierarchy:
- 2-digit — Sector
- 3-digit — Subsector
- 4-digit — Industry Group
- 5-digit — NAICS Industry
- 6-digit — National Industry
Most Common Business Codes
Although popularity varies, the most common NAICS codes tend to fall into:
- Professional Services
- Real Estate
- Online Retail
- Construction
Riskiest or Most Problematic Codes
While there is no official list, lenders often classify the following as high-risk:
- Bars & nightclubs
- Adult entertainment
- Gambling-related services
- Gas stations
- Auto repair
- Pharmacies
- Restaurants with table service
If Your Business Falls in a High-Risk Category
You may face higher rates or fewer financing options. However, alternative funding options such as business credit cards or revenue-based financing