OnDeck VS LoanBuilder: Which Is Best For Your Business?

OnDeck and LoanBuilder are both forces to be reckoned with in the short-term business loan space. OnDeck is probably the more recognizable name, but LoanBuilder was recently acquired by PayPal, which is arguably one of the most recognizable names there is. Both lending services are easy to apply for and have relatively lax borrower requirements, making these loans accessible to newer businesses and businesses with poor credit.

Both lenders also have a very fast time-to-funding. However, this convenience and accessibility come at a cost, as both OnDeck and LoanBuilder charge higher rates and fees when compared to traditional lending institutions such as banks and credit unions. You’ll also have to pay the loan back pretty quickly — usually within months or even weeks.

While they have a lot of similarities, these popular online lenders also have some important differences you should know about before you apply. Read on to learn whether LoanBuilder or OnDeck is the better loan for your business financing needs.

What Is OnDeck & What Loans Does It Offer?

OnDeck was one of the first online lenders to make lending decisions based on algorithms, resulting in quick approval decisions that deliver funds to qualified borrowers within just one to two business days. Today, OnDeck is one of the most prolific online business lenders and is a global, publicly traded company.

OnDeck offers two business financing products: short-term loans and revolving lines of credit.

Rather than charging interest as with a traditional term loan, STLs like the one offered by OnDeck charge you a factor fee, which is a percentage of your total loan amount. For example, if your factor rate is x1.19, and you are borrowing $50,000, you will have to repay $59,500 in total ($50,000 x 1.19 = $59,500).

Generally, OnDeck is appropriate for businesses that want a fast business loan/line of credit or who cannot get approved for a loan/line of credit elsewhere. However, you cannot have very poor credit (a score less than 625), and you need to have been in business for at least a year.

What Is LoanBuilder & What Loans Does It Offer?

LoanBuilder is a PayPal-owned service and is sometimes branded as PayPal Business Loans. LoanBuilder offers short-term business loans. Similar to OnDeck, LoanBuilder charges borrowers a factor rate rather than interest. One unique thing about LoanBuilder is that on their website, you can adjust your prospective loan’s term length and borrowing amount to see how this would affect your borrowing fee and weekly payment amount.

Generally, LoanBuilder is good for newer businesses and businesses with bad-fair credit.

Note that you do not have to be a PayPal seller to apply to LoanBuilder.

Borrower Qualifications

LoanBuilder has more relaxed borrower requirements than OnDeck in terms of credit score, time in business, and business revenue. However, many businesses will qualify for both lending services. As follows are the two lenders’ minimum borrower requirements. You are still welcome to apply if you exceed either lender’s minimum qualifications, and more qualified businesses can usually secure lower borrowing fees and longer repayment terms.

Terms & Fees

One major difference between the two lenders is that OnDeck, in addition to a factor fee, also charges an origination fee — a one-time fee taken off the top of the loan. LoanBuilder does not charge an origination fee and only charges a factor fee. This doesn’t necessarily mean you’ll pay less for a LoanBuilder loan since LoanBuilder could potentially charge you a higher factor rate than OnDeck (and probably will, as LoanBuilder’s factor rates tend to skew higher than OnDeck’s). However, it does mean that you’ll receive a smaller upfront sum from OnDeck if you’re approved for the same amount by both lenders. For example, if you are approved for $50,000, and OnDeck charges you an origination fee of 4% ($2,000), you’ll only actually receive $48,000 from OnDeck (vs. the full $50,000 from LoanBuilder).

Another difference is that LoanBuilder has shorter repayment terms than OnDeck, which, on top of higher factor rates, means your automatic weekly repayments may be much larger than payments on an OnDeck loan for the same amount. However, OnDeck requires automatic daily repayments on some loans (instead of weekly), which some borrowers might not be prepared for. OnDeck’s LOCs always have weekly repayments.

With both OnDeck and LoanBuilder, your loan’s rates and certain terms will be determined on an individual basis, with better-qualified businesses generally receiving lower borrowing rates and a more comfortable repayment schedule.

LoanBuilder’s and OnDeck’s loans can be considered unsecured, as neither require you to have any specific business assets to put down as collateral; however, both lenders require a blanket lien on your assets and a personal guarantee.

Note that the rates listed above for OnDeck are based on loans originated in the half-year ending March 31, 2022.

Application & Funding Process

Both OnDeck and LoanBuilder have a quick and easy application process, which usually results in timely funding as quick as 1–2 days.

OnDeck Application Process

OnDeck has a brief online application on their website in which they might request the following information:

• Business Tax ID
• Bank statements for the previous few months
• Social Security number of the business owner(s)
• Driver’s license number and state of issue

OnDeck will also ask you to supply some personal information about yourself and your business, including why you are requesting the loan. Loan specialists are available to offer support during the application process via live chat, email, or phone. If you have all your pertinent business information at hand, the application shouldn’t take you more than 10–15 minutes to fill out.

After you complete the application, OnDeck will let you know whether you are pre-approved. If so, someone from the company will contact you to go over the loan details and gather any additional needed information. The entire approval process typically happens within 24 hours of application. If you accept the loan offer, the sum will be wired into your account within a day or two.

LoanBuilder Application Process

Similar to OnDeck, LoanBuilder’s initial application to determine your business’s eligibility only takes about 10 minutes and can be completed online or over the phone. You also have the option to sign in with your PayPal account, which will make the application go even faster. The application has five sections: Contact Info, Personal Info, Business Location, Business Details, and Verify Identity.

If you are pre-approved, LoanBuilder will request additional documentation and information, though the required documentation varies depending on the applicant. From LoanBuilder’s website:

It is possible the only required documents are four months of your recent business bank statements, but your Business Funding Expert will be able to explain exactly what is needed.

If you are approved and accept the loan offer during normal business hours (M-F by 5 PM Eastern), you may receive your loan funds as soon as the next business day.

Final Verdict

OnDeck and LoanBuilder have a lot in common. They both offer short-term business loans in amounts of up to $500K and cater to subprime borrowers. Generally, LoanBuilder has lower borrower qualifications and higher factor fees. Nevertheless, either OnDeck or LoanBuilder may offer you a better loan, depending on your individual qualifications.

Choose OnDeck When:

• You prefer a line of credit to a short-term loan
• You prefer a loan with a longer repayment term/smaller repayment amounts
• You have at least one year in business, $100K in annual revenues, and a credit score of 625+

Choose LoanBuilder When:

• You do not meet OnDeck’s minimum borrower requirements
• You do not want an origination fee deducted from the top of your loan
• You prefer weekly repayments over daily repayments

For many businesses, the better loan choice depends on which lender offers you a better deal. If you meet both OnDeck’s and LoanBuilder’s minimum borrower requirements, it’s a good idea to apply to both loans and see which lender makes you a better offer.

Both of these lenders only do a “soft pull” of your credit during the pre-approval stage and only do a “hard pull” (the kind that dings your credit score) later in the application process when you actually accept the loan offer. So there’s no harm in getting preapproved with both of these lenders, and indeed, it’s always a good idea to compare rates and terms from multiple lenders.

You can compare these and other similar lending products in our small business loan and/or business lines of credit comparison charts. You might also find these comparisons with other similar loans and LOCs relevant:

• OnDeck vs. Kabbage
• LoanBuilder vs. Kabbage
• Fundbox vs. BlueVine

Finally, don’t forget to check your credit score and do what you can to improve it before applying for loans so that you can get the best possible rate.