We recommend products that we love. When you buy through links on our site, we may earn an affiliate commission.
The North American Industry Classification System (NAICS) Association doesn’t have a publicly available list of low risk codes.
However, from working with lenders, many people in the business credit industry have determined that some industries obtain financing easier than others.
This is the list of lower risk industry codes.
Low-Risk NAICS Codes
Understanding what some of the lower-risk industries are can help you better determine what your code is. Here are a few of the low-risk NAICS Codes that illustrate which industries receive funding with less resistance:
- 4451: Grocery and Convenience Retailers
- 5614: Business Support Services
- 5621: Waste Collection
- 6113: Colleges, Universities, and Professional Schools
- 6117: Educational Support Services
What’s important to note here is that every code has numerous subcodes to choose from. For example, 44-45 is retail trade. You saw 4451 listed above. There are also codes like:
- 445110: Supermarkets and Other Grocery Retailers (except Convenience Retailers)
- 445131: Convenience Retailers
- 445132: Vending Machine Operators
Consider the following as you’re conducting research into your business:
- What types of products or services do I offer? What industries and NAICS Codes could my business fall under?
- Out of the available NAICS Codes, which is the best code that will help me receive funding?
- Has anyone already assigned my business a code? Is the code I’ve been using the wrong one? If so, what should I do to rectify the situation and get a code that does match my business?
The good news? There are plenty of resources out there that will help you find the right NAICS Code. You can start your search at NAICS.com.
How NAICS Codes Have An Impact on Your Ability To Get Financing
Creditors and lenders consider your industry when you’re trying to take advantage of business credit. Why?
The type of industry you’re in can inform them of the risk of extending funding to you. Generally, we know the reasons why lenders may reject us on an individual basis. But how do NAICS Codes influence their choice?
- Some industries are easily influenced by legislation. For example, businesses that sell firearms or even alcohol may be affected at a moment’s notice by changes to laws in the industry. This makes them less stable than businesses in other industries.
- Some industries are known for their inconsistent revenue, which can be another reason why some lenders may shy away from certain NAICS Codes. Take, for example, restaurants. If your business is known to have fluctuating annual income, you will likely experience issues trying to acquire funding.
- There are some industries where innovation happens so fast that certain businesses will likely be replaced soon. A NAICS Code reveals the industry you’re in and lenders can determine if you’re at risk of being easily replaced.
- Some industries are oversaturated, and not every business is successful. If your business is in a highly-competitive sector, this may prevent you from accessing the funding you need.
Overall, the NAICS Code you choose can make all the difference in funding accessibility. Make sure you choose the right code so you’re not making it more difficult to fund your vision.
How You Can Avoid High-Risk NAICS Codes
Some companies are strictly in one type of NAICS Code category. Others, however, may qualify for several.
If you’re fortunate enough to fall into one of these, you can choose the code that you best believe suits your business. Take a moment to:
- Come up with a list of NAICS Codes that might match with your business. Are you in the education sector? Do you produce physical products as well? What works best for your needs?
- Conduct further research on high-risk industries. Are there any that line up with the NAICS Codes you’ve listed? Would getting rid of them potentially hurt your business? For example, if you were to get rid of one and opt for the other, would it be honest? You don’t want to be dishonest or tricky when choosing a NAICS Code. It should make sense for your business.
- Look deeper to see how it might impact your funding regardless. Even if you’re low-risk, does your industry see more opportunities for financing and greater accessibility? Less?
Avoiding high-risk NAICS Codes and choosing the right one is a major decision. Employ this advice to make sure you’re on track. Otherwise, you may end up starting with credit solutions like credit builder loans.
Is It Possible to Have More Than One Primary NAICS Code?
No, it’s not possible to have more than one primary NAICS Code.
However, you can have multiple codes. This is often seen in businesses that may operate in more than one industry.
For example, let’s imagine that you operate a business that sells physical goods. Your primary NAICS Code is going to reflect this. However, you may also own a parking garage nearby that charges to ensure customers are able to park nearby. This could be another NAICS Code.
Beyond your primary, identify other NAICS Codes and determine whether or not secondary codes are needed.
Can You Change Your NAICS Code?
Not every business owner selects their own NAICS Code. If they don’t know their code ahead of time, some entities will select one for them.
The problem? Not all organizations are going to get it right.
At best, misclassification skews business data. At worst, it could trigger an audit or prevent you from getting the funding you need. This can limit you from getting the right options in your area like small business loans in Virginia or Florida.
This is why research prior to launching a business is crucial. But let’s imagine that you’re in this situation. What can you do? Can you change your NAICS Code?
The good news is that you can. It’s as simple as reaching out to the organizations that have misclassified you. In some cases, this might mean contacting credit agencies like D&B or Equifax. In other cases, you may even need to reach out to your bank or the IRS.
The moment that you notice the wrong code is being used, work to rectify it immediately.
The importance of NAICS Codes cannot be understated. Use the wrong code and you can hurt your business in the process.
Learn how to stick to low-risk NAICS Codes and avoid common credit problems with the guide above.
Dylan Buckley is a freelance finance writer and editor with 7 years of professional experience. Specializing in personal finance, cryptocurrency investments, and Fintech, Dylan is deeply passionate about creating content that helps readers make informed, confident financial decisions. He studied finance in college and maintains a credit score over 780.