Finance term
NAICS Code
Also known as: North American Industry Classification System, NAICS industry code
Definition
A NAICS code is a 6-digit number that classifies a business by its primary industry activity — published by the U.S. Census Bureau. Lenders use NAICS codes as an industry-risk input in business loan underwriting; some SBA programs restrict or limit financing for specific NAICS codes.
Detailed explanation
NAICS (North American Industry Classification System) was developed jointly by the U.S., Canada, and Mexico and is the standard industry classification system used by the U.S. Census Bureau (https://www.census.gov/naics/), IRS, SBA, and most federal statistical agencies. The 6-digit hierarchy works from broad to narrow: first 2 digits = sector, next digit = subsector, next digit = industry group, next digit = NAICS industry, final digit = national industry.
For lenders, NAICS codes are a risk-screening tool. Historically high-default industries (restaurants, retail, construction, certain hospitality segments) face stricter underwriting from conventional lenders. Some SBA programs explicitly restrict 'ineligible business' types by NAICS classification — gambling, life insurance, speculative real estate, and certain financial services are SBA-ineligible. Alternative lenders typically impose their own industry-restriction lists.
For borrowers, knowing your NAICS code matters because: (1) some lenders have automated risk flags on certain codes; (2) SBA program eligibility depends partly on NAICS classification; (3) industry-specific loan programs (agricultural lending, small manufacturer programs) use NAICS to qualify applicants; (4) state and local grant programs often restrict eligibility by NAICS.
Businesses can look up their NAICS code at census.gov/naics or irs.gov. The SBA's Size Standards (https://www.sba.gov/document/support-table-size-standards) use NAICS codes to define 'small business' — the revenue and employee caps that determine SBA eligibility vary by NAICS code.
◈ Worked example
- NAICS 722511 = Full-Service Restaurants — historically higher default rates; some lenders apply premium pricing or reduced advance rates
- NAICS 238 (specialty trade contractors) = construction sub-sector; SBA 7(a) and 504 typically available; some alternative lenders restrict
- NAICS 522110 = Commercial Banking — most lending programs ineligible for financial companies lending to other businesses
Common questions
The most-asked questions about NAICS Code — answered straightforwardly.
How do I find my NAICS code? +
Search the NAICS code lookup tool at census.gov/naics/ by industry description. Most businesses have one primary NAICS code for their dominant revenue activity. If you do multiple things, use the code for the highest-revenue activity. Your accountant or bank may have assigned a NAICS code when you opened your business account.
Can my NAICS code affect my loan approval? +
Yes. Lenders use NAICS codes as an input to risk pricing and eligibility screening. High-risk NAICS codes (restaurants, bars, retail) may receive higher rates, lower advance amounts, or outright declines from specific lenders. SBA has an explicit 'ineligible business types' list that maps to certain NAICS classifications. When applying, be accurate — misclassifying your NAICS code to avoid industry restrictions is loan-document fraud.
Further reading
This glossary entry is educational content. ClearValue Lending is a business & personal financing platform — not a lender, broker, or financial advisor. Specific product terms vary by lender; verify with the lender or issuer before applying. See privacy policy.