What is NAICS Code?
NAICS codes classify businesses into industry sectors using a 2-6 digit hierarchical system. The 2-digit code identifies the broad sector (e.g., 72 = Accommodation and Food Services, 54 = Professional Services, 31-33 = Manufacturing). In SBA and commercial lending, NAICS codes are critical because default rates and prepayment speeds vary significantly by industry. Accommodation and food service businesses (NAICS 72) historically have the highest chargeoff rates among SBA borrowers (~1.45x the national average), while professional services (NAICS 54) have among the lowest (~0.72x). This dispersion makes NAICS-level analysis essential for accurate credit modeling.
How LoanBook Uses NAICS Code
LoanBook uses NAICS codes as a multiplier in the SBA 7(a) and 504 default and prepay models. The SBA Lender Quality Analysis includes NAICS specialization scoring; banks that concentrate in high-risk NAICS sectors receive adjusted quality scores. The CRM provides NAICS-level analysis for each SBA originator.
Frequently Asked Questions
Which NAICS sectors have the highest SBA default rates?
Accommodation and Food Services (72) leads at approximately 1.45x the national average. Other elevated sectors include Other Services (81) at ~1.25x and Construction (23) at ~1.15x. Professional Services (54) and Finance (52) are among the lowest at 0.72x and 0.78x respectively.
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