What SIC and NAICS codes - YouTube

What's up Facebook Ty Crandall here with Credit Suite and today we're diving into NAICS codes SIC

codes we're talking about industry codes that make  your business high-risk so I am using a new format  

here trying to go back through Facebook's app and  hoping it doesn't crash because before we tried  

to do these live streams from Facebook's app but  had all kinds of issues we switched a Wire Casco  

but then there's all kinds of problems with that  as well including the clarity of the video was a  

good so we're going to see how we do with this today so today we are going to be talking about

NAICS Codes were going to talk about industry codes that lenders and credit insurers used to 

determine your risk in your business we're going to

talk about how you can choose your code what you  need to do to choose your code we're going to take  

a look at the actual IRS s guide on NAICS codes so  I'm actually going to show you where to go here to

be able to get the right any NAICS codes I'm even going to show you commercial credit reports with 

Experian and show you why choosing the wrong NAICS code can be a serious problem for you how

it will make you high risk how it will prevent you from getting  financing paying worse rates in terms than you  

should or not get you the money you need so today we're going to dive in we're going to talk about

NAICS codes we're going to dive in and look at the actual NAICS codes guide so you can find your   

ride in the NAICS code or industry code and we're going to look at how choosing the wrong code or  

having it chosen for you can prevent you from getting the financing that you need so let's dive in

SIC codes and NAICS codes we need to talk about both of these now this is SIC the standard

Industrial Classification code okay it's a four digit code offered by the IRS of the US government okay

and it basically identifies your primary business  activity so let's start here when we talk about  

SIC codes when we talk about NAICS codes we're  talking about these when what these codes are is  

they're issued by the IRS and they basically list  whatever your industry does what your industry  

does for its actual purpose now here's what you  need to know first of all there's a lot of these  

SIC codes I'll show you so here's the NAICS  code lists directly from the IRS that determines  

the actual category that your business is in. Okay,  this is how this works now why this is important  

is that when you look at commercial credit reports  as I'll show you here here's a commercial credit  

report with Experian these NAICS codes can  really affect your ability to get what you need.  

So let's look at this score this is a financial  stability risks were that lenders look at, see  

right here risk associated with companies industry  sector, so we see these all the time here's another  

commercial credit report, here's another low score  28, why risk associated with companies industry.

Let's look at another credit report, okay I don't know if this has it or not but let's look and see so if we  

look at the financial stability risks core risk  associated with the company's industry sector. So  

you can see here that on three commercial credit  reports we've actually seen that it creates a  

problem by having the wrong NAICS code. Here's  the problem most don't even know what an  

NAICS code is, so that's what we're going to talk about and most don't know that you choose this

code but if you don't choose it lenders and credit issuers are going to choose it and if you let didn't

choose it you know they're going to choose a high-risk code, because that means they make more

money. So let's beat the system today we're going to talk a little bit about this we're going to go back to

commercial credit reports, what's up Perman, and I'm going to show you how this whole thing works.

So SIC  codes this is the old system okay the first and second digit of this includes the major industry

group that your business is in, the third digit  of this is your industry group, the fourth digit  

is your industry. This is the way SIC codes used  to work, it was basically based on these numbers  

the first two digits indicate the major industry  group then there was like a smaller industry group  

and then the industry that you're in. Okay, now the  IRS uses these SIC codes and they're using them  

on your tax returns, and here's what they're really  doing they're looking to make sure deductions that  

you're actually using and claiming are similar to others in your industry. It's one of the biggest  

reasons that they use it the IRS uses this to just  basically look to make sure the deductions that  

you're claiming are consistent with deductions to  other people in your industry claim. But here's the  

problem, lenders and credit issuers have hacked  into the system and they're using it to make all  

kinds of adverse lending this it's about you and  denying you or pay making you pay higher rates.  

That's the problem that we need to fix, so again  what's coming in here is it's determining the risk,  

there's inherent risks in every industry, but some  industries are just more risky by nature when it  

comes to lending, okay. So you could be labeled as  high-risk with the wrong SIC code and that's why  

you've got to choose the right code. Now why does  this matter well it has to do with money because  

if you're a high risk that it means that you're  not going to get as much money as you should get  

or you're going to pay a higher rate in term than you  should actually pay, plus lenders are hesitant to  

do business with industries that are higher risk  it either means you'll face stricter underwriting  

guidelines or you're going to get denied altogether. Now the new system is the NAICS code  

this is the North American Industry Classification  System okay and this is basically used to have  

broader categories here than the SIC did. So think of it like this.The SIC code existed  

and it kind of broke it down into industry sub  industry and sub sub industry. Then they said wow  

there's all these new sectors that have appeared  what do we do now. Then they created the NAICS

code here I'm going to show you how to get it. So if I go here and here's the NAICS code actual guide

and I went before I jump on this live stream to figure out how you can get this and I'm going to

show you right now how we did it. So I went here and I googled NAICS code and Google and I'm going

to create a link at creditsuite.com/naics but before I do I want to show you how to get it.  

I then went to census.gov and I clicked right here  and I found the actual manual bam and then here's  

the manual. So the manual actually shows us all the industry codes all the sectors that you could be

in all the sub-sectors, so you can actually choose  your NAICS code you can figure out which is the  

best one for you now again I'm going to put this at  creditsuite.com/naics but until  

I do do it and if you're on the live stream you're  going to want to get it quicker and I just showed

you how we're going to go to Google we're going to Google NAICS code we're going to look down here

for census.gov we're going to click we're going to download this manual and we're going to study it till

we can find out which NAICS code is best for us that's how we're actually going to hack the system.

Here's what you need to know you are determining  your NAICS code you're doing it you don't know  

you're doing it and I'll tell you why and I'll  tell you how it's happening so what happens is  

when you go to fill out an application for credit  or financing they're asking what your industry is  

and you probably say something like whatever like  software but there's a lot of different software  

companies so they pick the NAICS code they think  is the best and most accurate depiction of what  

you're telling him and then they go without  any ICS code thank you for the like if this  

makes sense and if this is helping you then please  give me feedback that's what helps Facebook invite  

other people on here so you're actually choosing  this by putting the wrong industry on these  

applications and here's how you fix it first step  one go get this guy get this NAICS Guide as you  

just saw I went to census gov there's the actual  link census.gov /e OS /ww slash NAICS I showed you  

how to get it get this thing go through this thing  figure out the best industry and sub industry you  

think it is and this is the page number but find  the code go to the right page and find that code  

that is your industry find the code that is  your industry once you know the code that's  

your industry use it everywhere consistently  when I apply for a business loan I put the  

exact industry verbage from my NAICS indicator  and I put NAICS code and put my code on it so  

there's never any confusion if you don't do this  every time you apply for credit financing they're  

going to come in and they're going to assign you  a different NAICS code that they think as close  

to what you're telling them and then before you  know it you have a credit report with multiple  

NAICS codes and there's all kinds of issues with  that and again I'll show you what the actual issue  

is I already showed you a few minutes ago here it  is right here this is an actual commercial credit  

report from Experian okay this the picture risk  of going bankrupt the financial stability risks  

score look at why this score is so low risk  associated with the company's industry sector  

they don't like the industry again here's another  look at a the commercial credit report the score  

is low why they don't like the company's industry  here's yet another one why is a score low again  

they don't like the industry what's happening is  the credit bureaus are automatically scoring you  

low because they don't like the industry that  you're in and typically what happens is it's  

the lenders and credit issuers that get the code  wrong because you put it on the application they  

chose the closest thing and that's what gets you  these high risk underwriting decisions so you've  

got to choose that NAICS code now high risk are  some things are like cash industries or financial  

services casinos pawn shops liquor stores car  dealerships restaurants all high-risk industries  

when it comes to lending so who else uses these  codes lenders banks insurance companies business  

credit reporting agencies okay they want to want  to see if you're in a high-risk industry and  

then that will automatically trigger an automatic  turndown higher premiums or lower credit limits so  

when you go to get insurance when you go to get  loans when you go to get any kind of financing  

it's all tied back to this stuff it's all tied  back to the NAICS codes so they don't like your  

NAICS code your insurance premiums are higher your  loan gets denied your interest rate on your credit  

card gets higher your credit limits get lower it  all happens because they don't like that NAICS  

code so you've got to make better choices here now  your choice needs to be honest you don't want to  

be in software and go in a pawnshop and then you  don't own a liquor store and then tell them that  

you do software right I mean you got to be honest  here but there's multiple of these that can apply  

and that's what you need to know so let's look  at credit suite for example you could say we're  

financial services but we sell software he likes  software software's low risk financial services  

is high risk so because we have a choice between  the two we choose low risk software so look at  

the multiple NAICS codes that could be relevant to  your industry and choose one that doesn't make you  

high risk here's some more restricted industry  ammo weapons dealers manufacturing companies  

gaming gambling x-rated products and entertainment  automatic declines if you're in any of these some  

higher risk to industries which means you're gonna  face stricter underwriting guidelines include  

computer software services dry cleaners limo  services gas stations okay a convenience store  

long distance over the road trucking is considered  to be a higher risk industry Realtors brokers real  

estate developers land developers those are some  of the high risk industries that are out there I  

went over 25 30 of them here so now here's what  you need to know in summary first of all you  

have an NAICS code based on your industry if you  haven't chosen it's being chosen for you how do  

you fix it you first need to come in and get this  list right here to be able to fix that in order  

to do it we're gonna go right here to Google we're  gonna type in NAICS code we're gonna go right here  

to census.gov we're gonna download this manual  we're gonna go through the manual and find the  

industries that are most relevant to us we're  gonna look at all the ones that apply and we're  

gonna try to stay away from what I showed you  here all these high-risk industries all these  

restricted industries that I just went through  with you we're gonna try to choose something that  

keeps us away from this and keeps us to lower risk  and in doing so we can stay away from what we're  

dreading and we're trying to provide here which  is things like this ending up on our commercial  

credit reports low credit scores that result  from coming in and having an industry sector  

that the bureau's don't like the next thing you  do is you use that code everywhere everywhere it  

asks for your industry you use it when you file  your taxes you put the industry code that's the  

exact verbage of your NAICS code and on top of  that you put your NAICS code when you're filling  

out a loan application a credit application  anytime your industries ask for you put exactly  

the name of your industry per that NRCS code then  an abbreviation put any ICS and put your code and  

there's never a confusion you know what's gonna  happen they're still gonna screw it up so you  

need to monitor your business credit reports and  when you find that it's screwed up clarify with  

the credit bureaus dispute it and say this is the  cur incorrect NAICS code here's my correct NAICS  

code and they should fix it but if they don't fix  it if you dispute their bureaus and they don't  

fix it and they come back like expiry is done  with us and they said now I'm sorry we got this  

information from somewhere else we wrote Experian  back and said no you did it here's our Secretary  

of State they got it right here's our tax returns  the IRS has it right here's our dun and Bradstreet  

Equifax commercial credit boards they have it  right you have it wrong everybody else doesn't  

write fix it and you know what they did they fixed  it so you need to make sure you follow these steps  

to get the right NAICS code they gives you  the lowest risk industry and then you need  

to make sure you keep up on it by monitoring your  business credit reports and putting in correcting  

it and disputing with them if there's any any  accurate information on there can we help you  

didn't touch with us credit suite comm and  credit suite we focus on helping you build  

business credit improving your fund ability to get  the most money at the best terms and accessing all  

kinds of loans and credit lines in one place  so if we can help you at all our phone number  

or email everything you can get from our website  credit suite comm so thanks for tuning in and I  

will see you next Tuesday on Facebook live here at  two o'clock Eastern don't forget to take the extra  

steps we talked about go get the naics guide  find the NAICS codes its most relevant to your  

business use it on your tax returns and everywhere  else moving forward so you are not being treated  

unfairly by lenders and you can make sure that  you're not in a high risk industry that makes  

it tougher to get the money you need when you need  it thanks everybody for tuning in have a great day