- Borrower qualifications are lower than with banks
- Multiple types of financing available
- Lower costs for repeat customers
- The application process is fast and easy
- Funds are disbursed quickly
- Builds business credit
- Financing isn’t available in some states.
- Not available to businesses in some industries
- Rates can be expensive
OnDeck is a hugely prolific online small business lender. Founded in 2007, OnDeck became one of the first lenders to rely primarily on technology to make its lending decisions. With its algorithms, decisions that used to take days or weeks can now take only minutes. Currently, OnDeck offers two types of business loans: short-term loans and revolving lines of credit.
Many businesses will qualify for a loan from OnDeck — if you have been in business at least 12 months, make at least $100,000 annually, and have a personal credit score above 600, you have a good chance of qualifying. Those who are eligible will find that OnDeck’s loans are fast and helpful for a variety of business financing needs.
That said, OnDeck’s loans can be a bit expensive. According to OnDeck’s latest quarterly report (Q3 2019), its short-term loans typically have APRs that range from 9.0% to 98.3%, and line of credit APRs range from 19.9% to 61.9%. Naturally, however, the rate offered to you will depend on the strength of your business. In addition to the cost, OnDeck loans have a maximum repayment term of 36 months, so those who need a more extended term length might want to look elsewhere.
Because OnDeck’s loans can be a bit expensive, you may want to make some comparisons before settling on a lender. However, if you need a loan fast or don’t qualify elsewhere, it’s hard to beat OnDeck. Despite the potential drawbacks, OnDeck is transparent, customer service is easy to get in touch with, and overall, most customers report positive experiences.
Read on to learn more!
Table of Contents
OnDeck offers short-term loans of up to $500,000 and lines of credit of up to $100,000.
OnDeck’s short-term loans are quick and easy to apply for, and you may even be able to get your funds the same day your loan is approved. OnDeck also offers lower borrowing rates and other benefits, such as waived fees, to repeat customers.
OnDeck also offers revolving lines of credit, which are similarly fast and simple to qualify for — just fill out the application. Once you are approved, you can withdraw funds at any time, and there are no draw fees or penalties for repaying early.
Here are the minimum qualifications required to be eligible for a short-term loan or line of credit from OnDeck:
|Time In Business:||12 months|
|Business Revenue:||$100,000 per year|
Additionally, you must make at least five bank transactions per month to a business bank account, and your business cannot be in one of these restricted industries.
OnDeck currently does not lend to Nevada, North Dakota, or South Dakota.
Rates & Fees
OnDeck’s rates and terms are not as desirable as what you would get from a bank, but they are just as good — if not better than — those of other short-term lenders.
These are the terms and fees for OnDeck’s short–term loans:
|Term Length:||Up to 12 months|
|Fixed Fee:||0.4%-0.42% of the borrowing amount per month|
Learn more about effective APRs
|Collateral:||UCC-1 blanket lien, personal guarantee|
OnDeck does not charge interest on its term loans. Instead, your repayment amount is a fixed rate, also called a total interest percentage. The amount you have to repay is only calculated once; fixed rates don’t compound like interest. For example, if you have a fixed rate of 19% of the borrowing amount and you are borrowing $50,000, you will have to repay $59,500 in total ($50,000 x 1.19 = $59,500). OnDeck’s rates range from about 0.4%-0.42% of the borrowing amount per month (according to its Q3 2019 report), depending on the borrower’s term length and creditworthiness. Payments are made on a daily or weekly basis.
Aside from the fixed rate, the only fee OnDeck charges is an origination fee. This is taken directly out of the principal before you get the loan. So if you have a $10,000 loan with a 2.5% origination fee, OnDeck will take $250, and you’ll get $9,750.
As reported by OnDeck’s quarterly earnings report, loans carry an effective APR between 19.9% to 61.9%. Note that OnDeck’s lowest rates are available only to businesses with exceptionally strong creditworthiness and cash flow as well as having a spotless payment history on prior OnDeck loans. To understand how to calculate APRs on loans without interest rates, and learn about all the factors you should consider when evaluating the cost of the loan, head over to our article Short-Term Loans, Merchant Cash Advances, and APRs.
Some potential benefits of OnDeck’s short-term loans include same-day funding, which allows you to receive funds in your business checking account as soon as the same day you finalize your loan (though not all applicants will qualify). Your OnDeck loan may also have a prepayment benefit, which waives your remaining fees if you repay your loan early — however, loans that have this benefit built-in have a higher borrowing rate.
Additionally, for returning customers who renew with OnDeck, OnDeck offers loyalty benefits, in which it will waive all remaining fees on your existing loan if you choose to apply for a new loan (and your current loan is at least 50% paid down). OnDeck may also offer a lower or 0% origination fee for repeat customers.
Lines Of Credit
Here are the stats for OnDeck’s lines of credit:
|Draw Term Length:||6 months|
|Maintenance Fee:||Typically $20 per month|
|APR:||19.9% to 61.9%|
OnDeck offers revolving lines of credit. Credit lines are a maximum of $100,000; you can draw from your line at any time. Funds replenish as you pay them back, and you repay a percentage of your total borrowed amount each week. Its credit lines are not tied to specific collateral or intended to be used for a specific purpose.
Term lengths are 12 months per draw, and you can repay early without penalty. Unlike its term loans, OnDeck’s lines of credit do accrue interest, so the sooner you repay, the more money you save. As with OnDeck’s term loans, it reserves the lowest interest rates on lines of credit for the most creditworthy borrowers that have an excellent cash flow and a strong payment history on prior financing products from OnDeck.
Aside from interest, OnDeck has a $20 monthly maintenance fee but no origination or draw fees. Additionally, if you withdraw at least $5,000 within the first five days of opening an account, the company will waive your maintenance fee for the first six months.
OnDeck’s lines of credit carry the option of Instant Funding for transactions between $1K-$10K. This allows qualified businesses to withdraw funds from their LOC instantly at any time, with no added fee.
OnDeck has a fast and straightforward application process.
To start the process, all you have to do is fill out an application on the website. According to its FAQ, this is the information OnDeck might ask for:
- 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 for a bit of personal information about yourself, your business, and why you want the loan. While applying for a loan, you can call, email, or live chat with a loan specialist to help you through the process or answer questions.
When you’re done with the application, OnDeck will let you know if you’ve been approved or not. If you have, somebody from the company will get in touch with you to go over the details, make sure you understand the loan, and gather any additional information they might need.
All this usually takes less than 24 hours. Should you choose to accept the loan, it will be wired into your bank account within a day or two — possibly even the same business day.
Sales & Advertising Transparency
Over the years, OnDeck has gotten a lot of flack for its sales and advertising transparency. This lender famously did not sign the Small Business Borrowers’ Bill of Rights, a bill created as an attempt for companies in the industry to self-regulate. The bill includes standards, such as sales and advertising transparency and the right to non-abusive products. Lenders such as OnDeck claim the Bill of Rights does not represent the kind of products that they offer.
However, it should be noted that OnDeck has formed its own association with a few other lenders called the Innovative Lending Platform Association (ILPA) as a sort of response to the aforementioned Bill of Rights.
As it currently stands, OnDeck’s website transparency is fair. Although it does not disclose the full range of factor rates or APRs, you should have a good idea of how OnDeck’s loans work, what fees to expect, and what borrowers are eligible for the service.
Also, you’ll know everything you need to before accepting the loan — the ILPA has recently introduced SMART Box, a tool intended to help borrowers easily compare loan options. It includes some useful information, such as the APR and the cents-on-the-dollar cost for potential loans. While its website could provide a bit more information, you will know everything you need to know before signing the contract.
Customer Service & Technical Support
Customer service is available by phone, email, or live chat. You can also get in contact via OnDeck’s Facebook or Twitter or find the answers to basic questions in the FAQ located on its website.
The general consensus is that OnDeck has quality, proactive customer service. Merchants are paired with a single account representative for the life of the loan; these representatives are available to walk you through the process, answer questions, and make the whole process more personable. Customers appear happy with the level of helpfulness and knowledge of the customer service reps, and they seem to like the personal bond they form with them.
Negative Reviews & Complaints
OnDeck is accredited with the Better Business Bureau, with an A+ rating. In the last three years, it’s accrued a total of 31 complaints and 124 customer reviews, rating an average of a little over 3.5/5 stars. Given the size of the company, this number of complaints is not especially large.
Here are the most common complaints leveled against OnDeck:
- High Cost Of Borrowing: With effective APRs that could reach up to 98.3%, this lender’s loans can be far from cheap. For comparison’s sake, lenders that offer more traditional term loans usually carry APRs that cap off at 40% or less. While paying more for working capital is not the end of the world, I’d advise you to make some comparisons before accepting a loan if you have the time.
- Advertising Transparency: Some customers have felt that they didn’t fully understand the true cost of the loan before accepting the offer.
- Application Delays: While OnDeck can instantly make a lending decision for a majority of applicants, it does have to ask some applicants to submit more information. However, these delays are common in the lending industry and will not add a significant amount of time to the application in most cases.
- Daily Repayments: In theory, daily repayments sound nice because it means you don’t have to make a large payment once a month. However, if you find yourself operating on a narrow profit margin, ensuring that you have enough money in your bank account every day can be hugely taxing on you and your business. Should you ever find yourself in this situation, consider calling up OnDeck to work out an alternative payment schedule or refinancing your debt.
- COVID Assistance Was Insufficient: A number of recent complaints revolve around financial hardship caused by the COVID pandemic and associated lockdowns. The complainants claim that OnDeck took action to lower payments but not postpone them.
Positive Reviews & Testimonials
OnDeck has quite a few video testimonials on its website, along with a plethora of positive reviews on its Facebook, Trustpilot, and Google pages. OnDeck rates 4.8/5 stars on Trustpilot, with overwhelmingly positive reviews. While OnDeck loans undeniably carry some problems, it’s clear that a lot of merchants are pleased with the service. Here’s what they liked:
- The fast, easy application process
- The fast time to funding
- The friendly, knowledgeable customer service
- OnDeck reports to business credit bureaus (which helps you build business credit)
We’d like to hear from customers in a more neutral setting, though. Have you dealt with OnDeck? What did you think of the experience? Leave a message in the comments!
OnDeck seems to have made adjustments to their products in 2020, possibly in response to the business hardships caused by COVID-19. By lowering the maximum amount businesses can borrow and increasing the line of credit repay term to 12 months, OnDeck may be helping businesses avoid getting in over their heads on the loans. At the same, this does mean OnDeck won’t be as useful for bigger expenses as it was.
Because OnDeck is willing to lend to merchants with credit scores as low as 600, its offerings might be just what you need to tide your business over until you’re qualified for financing at lower rates. While some business owners might be able to find better rates elsewhere, OnDeck is clearly interested in educating the merchants and providing a pleasant user experience throughout the process.