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How to Avoid High Risk NAICS Codes – This is Foolproof!

Published By Janet Gershen-Siegel at March 4th, 2018

How to Avoid High Risk NAICS Codes – This is Foolproof!

Don’t Harm Your Funding Chances – Avoid High Risk NAICS Codes

Do you know how to avoid high risk NAICS codes? And build your Fundability™? And what does any of that have to do with how financial institutions view a business? But before we go any further, just what is a NAICS number, anyway?


So the North American Industry Classification System, or NAICS, has its own six digit coding system. This code classifies business establishments for the purpose of collecting, analyzing, and publishing statistical data related to the U.S. business economy. NAICS industry codes define establishments based on the activities in which they are primarily engaged.

For example, if your company makes tires and inner tubes, the NAICS code might be 441320, which is for tire dealers.

But that’s not quite right, now, is it? You’re a manufacturer and not necessarily a dealer. So the NAICS code would start with a string of numerals more like 4420, which is rubber tire manufacturing.

How the NAICS Works

The NAICS sorts businesses for the purpose of gathering, analyzing, and then publishing statistical data related to the United States business economy. The NAICS industry codes thereby define establishments as based on the activities in which they are mainly to get NAICS code.jpg - How to Avoid High Risk NAICS Codes – This is Foolproof!

In our tires example, the NAICS has several codes. They correspond to all sorts of stops that tires make along the way from manufacturing to end user. This includes different types of wholesalers and retailers and the like.

Low Risk NAICS Codes vs. High Risk NAICS Codes

The NAICS puts out its own list of high-risk and high-cash industries. Higher risk industries on the high risk business list include casinos, pawn shops, and liquor stores, but also automotive dealers and restaurants. Do you have a high risk business? Then the industry codes NAICS will reflect that on your business credit report.

OSHA requires injury and illness reports from certain high-risk industries.

Keep in mind, that list of high-risk and high-cash industries is a few years old and potentially incomplete, and there are no plans to update it.

However, the NAICS coding system is not the only coding system out there affecting business credit files. Here’s another which is often used. It’s something to pay attention to, for business credit building purposes.

Business SIC Codes

What is a SIC number? The SIC Code (Standard Industrial Classification) is a part of another business classification system.

A Standard Industry Classification code, or SIC is a four digit numerical code which is assigned by the federal government to businesses, to make it easier to identify the primary activity of the business.

This is an indicator of the kind of business a company is in. The Securities and Exchange Commission developed this system. For example, in our tires case, then your SIC code would be 3011. The numbers are somewhat intelligent in that there are ranges of industry groups which correspond to the first of the four digits, such as manufacturing corresponds to four digit SIC codes that start with either a 2 or a 3.

The combination of the first and second digits then defines the major industry group in small business SIC codes. In our example, 30 designates ‘Rubber and Miscellaneous Plastic Products’.

Digit Groupings

The SIC code’s digits are grouped to identify the industry and its group. The first two digits in the SIC code identify the major group, the third digit identifies the industry group and the fourth digit identifies the industry.

In fact, the Internal Revenue Service will use the SIC code that you select. This is in order to determine if your business tax returns are comparable to the other businesses in your industry. Therefore, if your tax deductions do not reasonably resemble the other businesses in your industry, your business could be audited. 

This means the IRS is looking where to find NAICS code on tax return – your tax return.

Low Risk SIC Codes for Businesses vs. High Risk SIC Codes

Furthermore, some companies may be labeled high-risk when they do not select the right SIC codes to classify their company. However, if you understand how the business classification system works, then you can choose the correct code on your first try.

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Which Coding System do the Banks and the Business Credit Reporting Agencies Use?

Business credit bureaus and small business lending institutions use both. However, the SIC code system is phasing out and NAICS codes will replace it. But for the moment, assume they are both in play, as the transition has not yet finished. These coding systems are similar but not identical.

Lenders, banks, insurance companies and business credit reporting agencies use the two business classification systems to see if your business is a high-risk industry classification.

This means that you could get a denial for a loan or a business credit card based on your business classification. Some SIC codes can trigger automatic turn-downs, higher premiums, and reducing credit limits for your business.

You must be careful when you choose NAICS codes for your company. The Internal Revenue Service will use the NAICS code that you select. This is to determine if your business tax returns are comparable to the other businesses in your industry.

Therefore, if your tax deductions do not reasonably resemble the other businesses in your industry, your business could be subject to an audit.

Furthermore, some companies are labeled high-risk when they do not select the right NAICS codes to classify their company. But if you understand how the business classification system works, then you can choose the right code on your first try.

True Injury Risks According to the CDC

In 1999, the Centers for Disease Control published an article on risks in small businesses. This article contains information on SIC codes and gives information on injuries associated with the codes.

While this is not the true means by which lending institutions decide on risk, it is still of interest. And it can show what may be behind some of the reasoning. This could be the answer to what is NAICS code used for.

Part of the calculus of risk comes from occupational injuries such as those noted in the CDC report. But the other side of the risk coin is occupations which are cash intensive businesses.

After all, a pawn shop might not have much of a specific risk of injury at all. But the large amounts of cash normally associated with one mean that it’s a tempting target for thieves.

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Avoid High Risk NAICS Codes and Choosing Better NAICS Codes

Let’s go back to our tire example for how to choose the proper NAICS code for your business. The first two digits of the SIC code will identify the major industry group. Then for the business activity code NAICS, the third digit will identify the industry group. And then the fourth digit will identify the industry. This is how these agencies classify businesses.

Now you should learn how to get a NAICS code.

Here’s how to get NAICS code for your company:

  • Go to
  • Use their search function and their business activity code lookup
  • Select the closest fit – if there is no good fit, search again for other NAICS business codes

You Can Avoid High Risk NAICS Codes

There are certain high risk NAICS codes which will get you a loan denial if you choose them for your business classification. So before you choose your SIC code and NAICS codes, look over the high risk industries list of cash intensive businesses and more. Do so before you begin to build your NAICS codes.

Here are some high-risk industries codes you should be aware of:

  • Automotive sales
  • Money lending and collecting
  • The travel industry
  • Real estate investing (this is potentially where the NAICS code for real estate would be – the NAICS code for real estate is 531390 for Other Activities Related to Real Estate)
  • Anything else with reference to investing of any type
  • Adult entertainment
  • Restaurants
  • Dry Cleaning establishment

Avoid High Risk NAICS Codes: Back to Our Example for a Moment

But what is the NAICS code? For automotive sales, for example, you would normally select 441110, ‘Automobile dealers, new only or new and used’.

However, most lenders will automatically turn your business down because of the high-risk factor within the business classification name. Of course you want to be honest with your NAICS coding classification.

However, if more than one NAICS code could apply, don’t worry. Because there is nothing wrong with choosing company NAICS codes which will not get you denied by lenders.

Therefore, if you want to have your automobile sales company, you need a business code which has something like automotive parts written in the actual business code. That way, you can still operate your real business of “automotive sales” without being considered risky.

You’ll be fine, even as lenders search companies by NAICS code, using an NAICS lookup by company name. A better NAICS code can be the difference between business funding – and no funding.

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Avoid High Risk NAICS Codes: Takeaways

Choosing the incorrect NAICS code could end up costing your business and get you labeled as high-risk. So this could directly impact your insurance premiums, your financing ability, even your credit limit recommendations.

This small error of selecting the incorrect NAICS code could cost your business in the future.

Therefore, be sure to do your research before you select an NAICS code for your business.

Restricted industries (automatic decline) include:

  • Ammunition or Weapons Manufacturing; wholesale and retail.
  • Bail Bonds
  • Check Cashing Agencies
  • Energy, oil trading, or petroleum extraction or production
  • Finance: Federal Reserve Banks, foreign banks, banks, bank holding companies (This is likely where you would find the NAICS code for a holding company.), loan brokers, commodity brokers, security brokers, mortgage brokers, mortgage bankers, mortgage companies, bail bond companies, or mutual fund managers).
  • Gaming or Gambling Activities
  • Loans for the speculative purchases of securities or goods.
  • Pawn shops
  • Political campaigns, candidates, or committees
  • Public administration (e.g., these are city, county, state, and federal governmental agencies).
  • X-rated products or entertainment

High Risk Industries (subject to stricter underwriting guidelines):

  • Agriculture or forest products
  • Auto, recreational vehicle or boat sales.
  • Courier services
  • Computer and software related services.
  • Dry cleaners
  • Entertainment (adult entertainment is to be considered restricted).
  • General contractors (here is where you would likely find the general contractor NAICS code)
  • Gasoline stations or convenience stores (also known as c-stores)
  • Healthcare; specifically nursing homes, assisted living facilities, and continuing care retirement centers.
  • Special trade contractors
  • Hotels or motels

More High-Risk Industries

  • Jewelry, precious stones and metals; wholesale and retail (this could be where to find the NAICS code for retail sales).
  • Limousine services
  • Long distance or “over-the-road” trucking.
  • Mobile or manufactured home sales.
  • Phone sales and direct selling establishments
  • Real estate agents/brokers (this is potentially where the NAICS code for real estate holding company would be)
  • Real estate developers or land sub-dividers
  • Restaurants or drinking establishments.
  • Software or programming companies
  • Taxi cabs (including the purchase of cab medallions) .
  • Travel agencies


  1. This is a good article. I work in the mortgage protection business and insurance carriers are beginning to take the employer’s SIC code of an applicant into consideration when underwriting an insurance policy in addition to other consumer data. I am interested to know what the lowest risk SIC codes are please?

    • Janet Gershen-Siegel says:

      Thank you.

      You are probably not going to like this answer, but the truth is, it depends. The higher risk NAICS and SIC codes out there tend to correlate with industries where either there’s a high chance of injury or the business performs a lot of cash transactions (thereby tempting thieves). Of course any company can be burgled, and any business can be sued. Life is a roll of the dice. But there is an appreciable difference in the risk of injury on a construction site versus in an insurance office.

      An unofficial NAICS list of the highest-risk industries ( does overlap with OSHA’s much more official list of industries where an employee must submit an injury and illness summary ( But the overlap isn’t perfect, and some of these industries are being called by different names. In particular, OSHA seems less concerned with businesses engaging in a lot of cash transactions. So take it with a grain of salt. It’s just to give you a rough idea.

      But the gist here is to find industries which the NAICS or SIC *doesn’t* consider to be high cash transaction volume or high risk of injury. Gas stations, for example, are probably always going to be considered high risk because they are often a target for thieves and there are enough chemicals and slippery surfaces around, not to mention humans in close proximity to cars, so there are high risks of injury.

      Then again, even artists have risks of injury (paint fumes, stress injuries from dancing, etc.) but they are *probably* not going to be seen as high risk (

      If an industry (like pawn shops) keeps coming up as high risk no matter what, then there may not be too much anyone can do about that. I hope this is helpful, at least to an extent. Thank you for your comment.

  2. A says:

    But does the government reward a minoity company with higher grants if they do a loan for a high risk loan that us a minority?

    • Janet Gershen-Siegel says:

      At times. You’ll need to check individual grant requirements, as they vary widely, and they can also change. Also, go local, and see if your state, city, or town is offering anything, and if they have preferences. You’ll never know unless you ask. Good luck!

  3. Chris Haines says:

    All I read or see are examples of High risk sic and naic codes.
    What would be examples of Low risk businesses? and corresponding SIC codes?
    thanks in advance.

    • Janet Gershen-Siegel says:


      This is a great question.

      The main thing you want to be doing is taking away anything that looks high/higher risk, if you can.

      For example: real estate tends to be seen as high risk, kind of no matter what. This is because realtors deal with all sorts of personal dangers, business locales can have trips and falls or snow shoveling problems, and real estate investing itself is volatile.

      Hence if your business is real estate investing, you may want to list it under something more like Business Services, Not Elsewhere Classified (SIC 7389) and All Other Business Support Services (NAICS 561499). I searched for both of those under a general search for ‘business development’, at:,development

      Or let’s say you have a political campaign, another high risk industry, because it’s not stable or long-lasting — your candidate either gets in or they don’t, and the campaign (thank heavens) eventually ends. Maybe it can fit under Public Relations Services (SIC 8743) and Public Relations Agencies (541820).

      Of course you want to be honest and you don’t want to be too far fetched. A trucking business shouldn’t be listed under flower shops. The IRS will also take an interest in SIC/NAICS codes that are too wide off the mark, as they (the IRS, that is) use the codes to compare to others in those industries to be sure income, deductions and whatnot are all more or less in line with the norm. Too much deviation and you may find yourself on the business end of an audit.

      I think it would also pay (perhaps quite literally) to consider a wide range of financing options, since even the best SIC/NAICS codes may still get you a denial once a bank figures out what the business truly does.

      I hope that this is helpful. It may pay to expand operations, too. If a real estate investments firm also starts a business association (the Association of Realty Investors, if there is such an organization, or something like it), maybe it could be listed under Business Associations (SIC 8611) and Business Associations (NAICS 813910).

  4. Shawn says:

    Were the low risk naics codes left out intentionally?

  5. Nerissa Correa says:

    So if I want to start an online accessory boutique how could I operate on a low risk code? Please help ):

  6. fili says:

    If i want to do a car rental what would you recommend instead as code

    • Janet Gershen-Siegel says:

      Hi, great question!

      I looked car rental up, on then NAICS side, and I found 532111 – Passenger Car Rental.

      I also found 532120 – Truck, Utility Trailer, and RV (Recreational Vehicle) Rental and Leasing (in case you ever wanted to expand the business).

      Neither of them are on what is admittedly an old list that is likely to be incomplete:

      But I would caution you, even though those particular codes aren’t on that list, the industry *may* still be viewed as being high risk. After all, you’ve got people driving vehicles that are unfamiliar to them. It’s the kind of situation where insurance is a must (by law almost everywhere in the US) and accidents are likely to be common.

      I looked up automotive accessories (441310) but that code *is* listed as being high risk.

      Therefore, for financing, I would highly recommend working directly with a lender which deals directly with car rental companies. Gud Capital is one such place:

      I also found this article, which is from 2015 but still seems to be on point:

      Best of luck to you with your business!

  7. I have been searching for a low risk code for Business Consulting and cannot seem to find one. Anu suggestions. The one I am using now is show as high risk 8748/541618

    • Janet Gershen-Siegel says:

      Hmm it may depend on the type of consulting you’re doing, or at least which industry you’re doing it for. Hence, for example, if you were consulting for elementary and secondary schools, you might be able to go under something like 611110 (SIC 8211).

      Hence it may involve a little thinking outside the box, as it were. Best of luck with your business!

  8. stacy madison says:

    Hi there, we just started a property preservation business and the NAICS codes really didn’t pertain to us, so we used real estate and construction. What are your thoughts on this? Is there any way to petition to add a category?

    • Janet Gershen-Siegel says:


      I had never heard of your profession before so thank you for educating me.

      Looking through the NAICS database, it’s possible that 561790 – Other Services to Buildings and Dwellings could apply.

      I believe there’s a contact link (probably at the bottom of the site) and I imagine there’s no harm in asking.

  9. Hey Janet, Thanks for providing some insight in the comments. You are super helpful. Would the code 624229 – Other Community Housing Services be considered to be low-risk? My company works with non-profit and government agencies to provide transitional housing. Any advise would be great if this is not the best code.

    • Janet Gershen-Siegel says:

      Hi and thank you 🙂

      I looked 624229 up here: and I did not see that code listed.

      However, since that list is a good 7 years old with no update, I hope what I’m telling you is still valid.

      In general, high/higher risk codes have to do with either (a) cash-intensive businesses (like gas stations) and (b) businesses where there’s a high risk of personal injury, either to someone working there or a customer/client (think trucking, or places where you can climb a wall). Of course, some industries can have both (like real estate).

      So now it’s a bit of a question of what your business truly does. That’s particularly interesting when you look at the examples the NAICS gives – there’s “Volunteer housing repair organizations” (which would likely fall under risk of personal injury, since you’re working with hammers and saws, etc.) but there’s also “Energy assistance programs” (which I imagine could be companies that advise on whether your house will benefit from adding solar panels or switching to gas heat – hard to see that one as risky, particularly if most if not all of the work is done either online or by phone).

      So, you can see why I’m about to write to the good folks at the NAICS and ask them to clarify their intentions.

      I hope this is helpful. Sometimes, I hate to say, the answer is: possibly.

      Best of luck with your business.

      ~ Janet

  10. Angels Owens says:

    Hi, I’m interested in Reselling, Wholesalers; and starting a jewelry business online and actually want to start a YouTube channel on how to make jewelry etc. I pulled a lot of Naics, Sic codes up and don’t know which ones are high risk or low risk in order to do a startup business and and an online sales and teach how to’s. Which codes would work?

    • Janet Gershen-Siegel says:

      Hi and thank you for asking. The NAICS has an old (as in, it was last updated in 2014) list of high risk codes, and 423940 (Jewelry, Watch, Precious Stone, and Precious Metal Merchant Wholesalers) and 448310 (Jewelry Stores) are on there. So I would say that it’s clear that you should not be using either of them.

      Let’s think of what you can use instead.

      The NAICS doesn’t seem to distinguish between online and offline stores (which I think is silly, as online work means no one can trip and fall in a brick and mortar facility, and by definition you can’t take cash — but I digress). I think the channel may be the best way to go, so I came up with: 519130 (Internet Publishing and Broadcasting and Web Search Portals) which they specifically say includes Internet video broadcast sites. And it seems they mean web broadcasting, rather than a video hosting site like YouTube.

      I think that would be the best way to go. Best of luck with your business!

  11. Sam Warrick says:

    Hi Janet!!

    Thanks for all your help!

    I’m in the real estate sector but I’m also a mental health therapist who caters to other healthcare professionals who need short term housing when they’re on month(s) long assignments.
    I wanted to know what low risk NAICS code I should use since what I do is a little more broad and can be either healthcare or business services.
    I’m currently using the SIC code: Real Estate Consultant – 87420406
    And where are all the places I should go to update my NAICS code after I change it?

    Also, I can’t find my NAICS code anywhere, even on the website. The only place I see a code is on and it only shows my SIC code. Can you point me in the right direction, thanks so much!

    Sam Warrick M.A.
    Philadelphia, PA
    (215) 525-1982
    [email protected]

    • Janet Gershen-Siegel says:

      Hiya Sam (I lived in KofP about a thousand years ago)!

      I suspect you’ll do best with 621330 Offices of Mental Health Practitioners (except Physicians) (Social workers’, mental health, offices (e.g., centers, clinics). It’s not on the high risk codes list and the code seems to be really on point. There are issues with both real estate (considered to have high risks of personal injury due to slips and falls) and consulting (considered to be high risk due to the low barrier to entry, so lenders feel there are people in those fields who don’t know what they’re doing and are thereby more likely to go bankrupt). I think, from checking the NAICS site, that your code should be 531390 Other Activities Related to Real Estate (Real estate consultants’ (except agents, appraisers) offices). NAICS codes only have 6 digits or fewer, so I wonder if the code you were given was a typo?

      Nothing on the high risk codes list has anything to do with health, so I think it would be all right. But there’s nothing stopping a lender or CRA from deciding mental health = dangerous patients and throwing you into the high risk bucket.

      But all is not lost, because alternative lenders likely won’t care about your NAICS/SIC codes. You can Google business loans for mental health professionals. Another option I found in my travels was SAMHA grants – see – – but keep in mind that grants are competitive and often not for a lot of $.

      As for where the code is – I believe you can/will need to update it on the D&B website, here:
      Looks like this is the spot to update it on the Experian website –
      I couldn’t find a specific place to update Equifax, so here’s their customer service contact page:

      If your business is on any federal government contracting lists (i.e. if your business is certified as veteran-owned, that sort of thing), or state incentive program lists (often for industries which get state-specific tax incentives), the code should be there as well.

      You may also see it on your IRS records and your insurance records. I found this bit from the IRS on the codes: But for your insurer, I’m afraid you’re on your own, sorry.

      And finally, lenders would have it/would get it. If they don’t have the right one, I would suggest sending them written documentation of the correct code, like a screenshot of the IRS site page.

      Hope this helps!

  12. Sam says:

    Hi Janet,

    Thanks so much for your response to my question 🙂

    Oh wow! Just around 20 minutes from me.. I’m sure if you ever come back, you’ll see how much it expanded!

    Since Mental Health do have a lot of risks especially dealing with clients who come from various levels of trauma and the legal issues that comes with HIPPA, would it be best to choose a NAICS code that covers the entirety of what my services provide rather than picking codes that signifies other activities related to real estate (which any code with real estate is considered high risk) and mental health practitioner codes?

    I was considering using codes such as: Business Services, Not Elsewhere Classified (SIC 7389) and All Other Business Support Services (NAICS 561499). Please let me know your honest thoughts!


    • Janet Gershen-Siegel says:

      Hey Sam,

      I imagine that’ll work. 561499 isn’t on the high risk list and it’s vague enough that it wouldn’t be an immediate ‘no’ from a lender.

      Best of luck with your business!

      ~ Janet

  13. Dee says:

    Hi Janet,

    I’m trying to decide what NAICS/SIC to use. I own a duplex where I live in one unit and rent the other unit out (Hired a Property Manger to take care of that). I also make low content books and sell them on Amazon. Any suggestions on a low risk code?

    Happy New Yr!

  14. Cesar says:

    hi, thanks for such an important post and for your help, i have a executive transportation company which falls in limo taxi code, i know that is a high risk code, how can i improve to be able to have better credit options.

    • Hi Cesar, thanks for your comment. It all boils down to having solid Fundability. There are a lot of factors affecting your fundability but one factor you can control is the Foundation of your Fundability. That’s your Biz Entity Name, Biz Address,Biz Phone Number, website and email, getting set-up with Credit Reporting agencies etc. You can download our business credit guide at to get guidance on how to set up your business the right way to maximize business credit & financing. Hope this helps.

  15. Adianice says:

    Hello, thank you for this article.. if I’m owning, running a hotel .. its apparently high risk.. are there codes that are low risk for this industry? I imagine as a management company?

    Also, how would i know how the irs assigned my naisc code.. and how why i change it??

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