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Business owners who apply for federal assistance through the CARES Act (and those who fill out other forms with the IRS) may come across a field asking for the NAICS code. Oftentimes, the form will ask owners to submit their code or look up their code through a series of questions.
What is the NAICS code? How can you find it? And why should you know it? Keep reading to answer all of these questions.
NAICS stands for North American Industry Classification System and describes a system used to evaluate businesses within the economy. NAICS was developed in 1997 to replace the Standard Industrial Classification (SIC) system to create a system that can be standardized across the United States, Canada, and New Mexico.
NAICS is a self-assigned system, which means you choose a code that best describes your business. The NAICS has a site where you can browse codes based on various industries and search for key terms related to the work you do. There are dozens of codes to choose from, so it may take a while to find one that matches your business the closest.
For example, under the “Agriculture, Forestry, Fishing and Hunting” category, a farmer could select soybean farming, grape vineyards, apple orchards, or dozens of other options. The field of advertising is broken down into agencies, direct mail, radio stations, and other categories.
The only instances where you cannot fully self-assign a NAICS code are when working with OSHA, the EPA, and the DEP, which assign codes based on environmental factors.
While NAICS information is primarily used for statistical analysis of industry trends, various governing bodies will ask for the code in their paperwork. Some state governments offer tax incentives for specific NAICS codes to incentivize development in that field. Certain contracts can only go to specific NAICS businesses—especially on a federal level.
By having a unified system for companies to identify themselves, regulatory bodies and other organizations can protect business owners and ensure America has a balanced economy.
The PPP application as part of the CARES Act asks for NAICS codes to make sure the right businesses are getting the aid they need. Through the NAICS code, the Small Business Administration (SBA) can distribute funds across all industries fairly.
Additionally, this code helps ensure that companies applying for specific loans (like those related to hospitality) fall firmly within the field. That way, a company with a code related to advertising that had hospitality clients wouldn’t take from an actual hotel or restaurant—as an example.
Keeping your NAICS code on hand before applying for PPP assistance can make the process go faster and help you apply with confidence.
Now that you have a better understanding of NAICS, take the next step so your business gets the support it needs. At Lendio, we have several guides for navigating PPP relief and can help you apply for a loan that can keep your business afloat.
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