Low Risk NAICS Codes: The Secret to Getting Bank Approval in 2025

NAICS codes with low risk ratings substantially affect your ability to get business financing. Lenders can reject your application based on your industry classification alone. Many businesses in sectors like dental offices and hotels easily secure SBA loans, but high-risk industries face challenges despite having strong credit scores.

What is a NAICS Code and Why It Matters

The North American Industry Classification System (NAICS) helps federal agencies group businesses across the United States, Canada, and Mexico. Your NAICS code matters a lot when you need financing. This six-digit number shows lenders how risky your business might be.

How NAICS codes classify your business

NAICS codes group businesses by what they do. The system looks at businesses that use similar materials, equipment, and workers. It took over from the Standard Industrial Classification (SIC) system in 1997 to better match new business types.

The six-digit code follows a hierarchical structure that becomes more specific with each digit:

• First two digits: Economic sector (there are 20 total sectors)

• Third digit: Subsector

• Fourth digit: Industry group

• Fifth digit: NAICS industry

• Sixth digit: National industry

A dental office has a different code than a furniture store. Even though both serve customers directly, they run their businesses in completely different ways.

The NAICS system lets you pick your own code in most cases. You can choose the one that best matches what your business does. Many businesses use multiple NAICS codes if they work in different industries.

The Bureau of Labor Statistics says NAICS helps "ensure that economic statistics reflect the changing economy". The codes get updated about every five years to include new types of businesses.

Why lenders care about your NAICS code

Your NAICS code helps decide if you can get different types of funding. Lenders look at these codes to figure out how risky it might be to give you a loan.

Most lenders put industries into different risk groups:

• Preferred Industries: These might get faster approval or better loan terms

• Normal Risk Industries: These follow standard loan rules

• High Risk Industries: These need extra paperwork or checking

• Prohibited Industries: Some lenders won't work with these at all

The Small Business Administration (SBA) uses NAICS codes to set size limits for their loan programs. To name just one example, an engineering firm (NAICS 541330) must make less than $22.5 million yearly to count as a small business for SBA loans.

The right NAICS code lets you bid on government contracts that match your services. The Internal Revenue Service also checks your NAICS code when looking at tax returns. They compare your business to similar ones and might audit you if your deductions look unusual.

Insurance companies also use these codes to set your rates. Picking the wrong code could mean you pay more for insurance or get less coverage.

All but one of these lenders keep their own list of preferred and prohibited industries. Learning how your NAICS code affects your chances with different lenders helps you plan better financially.

How to Find the Right NAICS Code for Your Business

Your funding opportunities depend on choosing the right NAICS code. The process might seem overwhelming with thousands of codes to pick from, but doing this in a structured way makes it easier.

Use the official NAICS search tool

The U.S. Census Bureau's authoritative NAICS search tool serves as your best starting point. You can access the latest NAICS database at census.gov/naics. 

This powerful search utility lets you:

• Enter keywords related to your business activities

• Browse through hierarchical category structures

• Search directly by 2-6 digit codes if you have a potential match

• Review detailed industry descriptions

The search process works simply - just type relevant terms about your main business activity into the search bar. You'll get a list of potential matches to look through. Businesses unsure about their classification can get help from the Census Bureau via email at naics@census.gov or by phone at 1-888-756-2427.

Match your main revenue source

Your NAICS codes should show what makes your company most of its money. The official guidance states that "a procurement is usually classified according to the component which accounts for the greatest percentage of contract value." Focus on the activities that drive your finances rather than secondary tasks.

Your business might need multiple NAICS codes if several activities bring in substantial revenue, but one must be primary. This self-assignment approach gives you flexibility, but you need to be honest about your core business model.

The selection process needs you to see how your business matches the detailed descriptions in the NAICS manual. 

Contracting officers look at several things when they assign NAICS codes to procurements:

1. Industry descriptions in the NAICS Manual

2. The product or service description in solicitations

3. Relative value of different components

4. Function of goods and services being purchased

Avoid common mistakes in code selection

Businesses often make mistakes when picking their NAICS code that can limit their access to better financing options. Some choose codes that are too broad and don't capture their specific activities. Others stuff their profiles with too many codes, which waters down their main focus.

People often skip reading the detailed code descriptions fully. A quick keyword match might look right but miss important details that set similar industries apart.

Your NAICS code should change as your business grows and changes. The NAICS system gets updated about every five years, so you should check if your code still fits your business regularly.

Picking a low-risk NAICS code that truly shows what you do can help you get loans more easily. But trying to make your business look better by picking the wrong industry category might cause problems with compliance or audits.

Finding your NAICS code might sound technical, but it really comes down to showing lenders exactly what your business does so they can understand your risk level better.

Low Risk NAICS Codes List for 2025

The right industry can make or break your chances of getting a loan approved. Here's my latest research on low risk NAICS codes that banks and lenders favor in 2025. I've broken it down by industry sectors and their funding potential.

Top low risk codes by industry

Banks and lenders favor certain industries because they're more stable and less risky to finance. These businesses typically show steady revenue streams, predictable models, and lower default rates. Here are the top low risk NAICS codes that lenders love:

Healthcare & Medical

• 621210: Offices of Dentists

• 621111: Offices of Physicians (except Mental Health Specialists)

• 621310: Offices of Chiropractors

• 621610: Home Health Care Services

Professional Services

• 541611: Administrative Management and General Management Consulting Services

• 541612: Human Resources Consulting Services

• 541211: Offices of Certified Public Accountants

• 541110: Offices of Lawyers

• 541330: Engineering Services

Property & Real Estate

• 531311: Residential Property Managers

• 531312: Nonresidential Property Managers

• 531110: Lessors of Residential Buildings and Dwellings

• 531120: Lessors of Nonresidential Buildings

Contracting & Construction

• 238220: Plumbing, Heating, and Air-Conditioning Contractors

• 238210: Electrical Contractors

• 238990: All Other Specialty Trade Contractors

• 236220: Commercial Building Construction

Service Industries

• 812112: Beauty Salons

• 624410: Child Day Care Services

• 713940: Fitness and Recreational Sports Centers

• 624000: Social Services (social assistance)

Technology & Data

• 518210: Data Processing, Hosting, and Related Services

• 541512: Computer Systems Design Services

• 511210: Software Publishers

Best NAICS codes for funding opportunities

Some NAICS codes get more funding approvals than others. These industries attract strong interest from both government contracts and private lenders.

The Small Business Administration (SBA) loan data shows these NAICS codes have the highest funding success rates:

Top SBA-Funded NAICS Codes:

• 621210: Offices of Dentists – ranks among the highest-funded industries

• 484121/484122: General Freight Trucking, Long-Distance

• 721110: Hotels and Motels

• 713940: Fitness and Recreational Sports Centers

• 621111: Offices of Physicians

Manufacturing stands out because 47% of firms get their financing approved. The Federal Reserve's 2022 Small Business Credit Survey ranks it as the most successfully funded industry.

Government funding flows heavily into these industries:

• Information Technology (541519: Other Computer Related Services)

• Professional Services (541611: Administrative Management Consulting)

• Healthcare (621111: Offices of Physicians)

• Engineering Services (541330)

The U.S. Department of Treasury's Guide for Small, Minority-Owned, and Women-Owned Businesses highlights 541519 (Other Computer Related Services) and 541512 (Computer Systems Design Services) as top funding recipients.

Beauty and personal care, marketing and advertising, and financial services show the strongest funding growth trends for 2025. Software publishers (511210) have an excellent ratio of contract dollars to contractors, which means less competition for big funding opportunities.

Your NAICS code is just one piece of the puzzle. Lenders look at your business credit profile, experience, and financial performance too. But picking the right code in a low-risk category can boost your chances of getting funded.

High Risk NAICS Codes to Avoid

Your choice of NAICS code can either open doors to financing or slam them shut completely. Some industry classifications immediately raise red flags with lenders. These can derail your funding plans whatever your business's actual stability.

Industries flagged by lenders

Lenders keep internal lists of industries they think are too risky for standard financing. Cash-intensive businesses often top these lists because income verification is tricky and money laundering risks are high. 

These include:

• Retail Operations: Tobacco product wholesalers (424940), convenience stores (445131), furniture retailers (449110), and electronics retailers (449210)

• Food Service: Full-service restaurants (722511), limited-service restaurants (722513), and cafeterias (722514)

• Automotive: New car dealers (441110), used car dealers (441120), and automotive repair (811111)

• Entertainment & Gambling: Casinos (713210) and adult entertainment establishments

Businesses with high volatility or regulatory challenges face similar scrutiny. Travel agencies (561510), real estate investing operations, and financial services businesses usually go through stricter underwriting guidelines.

Financial businesses like transactions processing (522320), consumer lending (522291), and credit intermediation (522390) run into substantial financing obstacles more often.

How high risk codes affect your loan terms

A high-risk NAICS code classification creates ripple effects throughout your financing trip. Traditional lenders might reject your application automatically without thinking it over. Credit industry experts point out that some lenders keep "automatic decline" lists for certain industries whatever your business's individual strengths.

Your application faces tougher underwriting requirements if you get past the original screening.

This usually means:

1. Extra documentation requirements

2. Tougher revenue verification

3. Higher collateral requirements

4. Longer approval timelines

Getting approved despite these hurdles comes at a cost. Businesses with high-risk NAICS codes usually get less favorable terms. Higher interest rates, shorter repayment periods, and smaller approved loan amounts are common.

Lenders might set lower credit limits and stricter covenants for cash-intensive businesses like restaurants or retail stores to handle their risk. Even automotive dealers with strong financial performance face extra scrutiny.

This risk-based approach goes beyond traditional bank loans. Merchant services providers might refuse services or charge premium rates for credit card transactions. Insurance carriers often utilize these same classifications to justify higher premium structures.

Tips to Improve Fundability with the Right Code

Your NAICS classification can make a huge difference in getting business funding approved. The way you choose and manage your industry code plays a vital role in your loan application's success, yet many overlook this aspect.

Multiple codes? Choose the right one

Your business might qualify for several NAICS codes if you have different revenue streams. You can boost your funding chances by picking the right one. The rules allow you to pick any valid code that represents your business.

Take a salon that makes hair care products - code 325620 (Toiletry Preparation Manufacturing) might work better than 812112 (Beauty Salons).

Pick a code that shows a major revenue source without misrepresenting what you do. "A better NAICS code can be the difference between business funding—and no funding," says one industry expert.

Need to update your NAICS code?

NAICS codes aren't set in stone. You can change them as your business grows. The self-selection system lets you switch from your original classification. 

Here's what you need to do:

1. Contact each organization where you've provided your NAICS code

2. Submit the appropriate form (e.g., Form DTF-95 for tax authorities)

3. Ensure consistency across all business registrations

Government agencies don't charge to update your NAICS code. Keep in mind that you report these codes yourself, so you can adjust them as your business changes.

Match your business name with your code

Lenders should see a clear connection between your business name and NAICS code. High-risk business names might lead to automatic rejections whatever code you pick. Your business's name, description, and classification should point to lower-risk activities.

Yes, it is smart to present your business in the best light to get funding, but don't misrepresent what you do.

Conclusion

NAICS codes affect your business funding success by a lot. Your understanding of this system creates a competitive edge during loan applications. The right industry classification is a vital strategy for success. Your NAICS code could make the difference between approval and rejection. Smart selection and timely updates maximize your funding opportunities.

FAQs

Q1. What are some examples of low-risk NAICS codes for business financing? 

Some low-risk NAICS codes include 621210 (Offices of Dentists), 541611 (Administrative Management Consulting), 531311 (Residential Property Managers), 238220 (Plumbing and HVAC Contractors), and 518210 (Data Processing and Hosting Services). These codes are generally viewed favorably by lenders due to their stable business models and consistent revenue streams.

Q2. How does my NAICS code affect my chances of getting a business loan? 

Your NAICS code significantly impacts your loan eligibility. Lenders use these codes to assess risk, categorizing industries as preferred, normal risk, high risk, or prohibited. A low-risk NAICS code can lead to faster approvals and better loan terms, while high-risk codes may result in additional scrutiny or even automatic rejection.

Q3. Can I change my business's NAICS code? 

Yes, you can update your NAICS code as your business evolves. The process typically involves contacting relevant organizations where you've provided your code and submitting the appropriate forms. There's usually no fee for updating your NAICS code with government agencies, and it's important to maintain consistency across all business registrations.

Q4. What should I consider when choosing between multiple applicable NAICS codes? 

When your business qualifies for multiple NAICS codes, choose the one that accurately represents a significant revenue source while also being associated with lower-risk industries. Ensure that your selection truthfully reflects your core business activities without misrepresentation, as this can improve your funding prospects.

Q5. How often are NAICS codes updated? 

The NAICS system undergoes revision approximately every five years to accommodate economic evolution and new industries. It's important to periodically review your code's relevance to ensure it still accurately represents your business activities, especially if you're seeking funding or participating in government contracting opportunities.