- Short-term loans
- Lines of credit
- Working capital loans
- Business expansion loans
- Fast time to funding
- Proactive customer service
OnDeck is a hugely prolific online lender. Founded back in 2007, OnDeck became one of the first lenders to rely primarily on technology to make their lending decisions. With their algorithms, decisions that used to take days or weeks only take minutes.
While relying primarily on an algorithm hasn’t worked out as perfectly as everybody has hoped (most of OnDeck’s peers still rely at least partially on human underwriters), OnDeck has been chugging along for nine years now. The company currently offers short term loans and lines of credit to qualified business owners.
Over the years, reception to the company has been mixed. Many analysts praise OnDeck for lending to businesses that banks won’t. On the other hand, others have accused the company of opaque advertising and sales practices, and offering a form of financing that can too-easily send a business into a debt spiral.
Both stances have some truth. Even now, OnDeck is the most lenient lender on the market. Their low borrower qualifications paired with high borrowing amounts and middling term lengths mean that just about anybody who’s been in business for at least 12 months can get financing, and fast. Unfortunately, the short time to funding, the wide range of merchants that can use OnDeck, and a couple of other attributes work to drive up the price of these loans. Basically, you’re paying for the convenience.
To put it in perspective, according to their 2016 financial earnings report, OnDeck’s term loans have effective APRs that range from 6% – 99%. While you might not be repaying more money than you would at other places, but you’ll probably be repaying the money significantly faster than you would otherwise.
It’s also worth noting that OnDeck’s term loans are repaid daily or weekly. If you have to repay $300 daily, for example, you’ve got to make sure there’s enough money going into your bank account each day to cover the cost. Lines of credit are always repaid weekly.
Because OnDeck’s loans tend to be more expensive than their competitors, you may want to make some comparisons before settling on a lender. On the other hand, because they accept so many merchants, OnDeck’s loans really can be helpful for a lot of businesses. If you do choose to use an OnDeck loan, please ensure that your business will not suffer because of the high daily or weekly repayments.
With all that in mind, read on for the details! Or, if you don’t think that OnDeck is for you, check out some of our favorite alternatives.
- Short-term loans
- Lines of credit
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|
Additionally, you must make at least 5 bank transactions a week, and your business cannot be in one of these restricted industries.
Terms and Fees
These are the terms and fees for OnDeck’s short–term loans:
|Borrowing amount:||$5K – $500K|
|Term length:||3 – 36 months|
|Factor rate:||x1.003 – x1.04 per month*|
|Origination fee:||2.5% – 4%|
|Effective APR:||Approx. 6% – 99%*|
|Collateral:||UCC-1 blanket lien, personal guarantee|
Aside from the factor rate (which we’ll get to in a minute), 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 $10K loan with a 2.5% origination fee, OnDeck will take $250, and you’ll get $9,750.
OnDeck does not charge interest on their term loans. Instead, your repayment amount is calculated via a factor rate, also called a total interest percentage by OnDeck. The amount you have to repay is only calculated once; factor rates don’t compound like interest does. For example, if you have a factor rate of x1.19, and you are borrowing $50K, you will have to repay $59.5K ($50,000 x 1.19 = $59,500). OnDeck’s factor rates range from x1.003 – x1.04 per month, depending on the borrower’s term length and creditworthiness.
Payments are made on a daily or weekly basis. They’re deducted from your bank account automatically via ACH.
Here are the stats for OnDeck’s lines of credit:
|Borrowing amount:||$15K – $100K|
|Draw term length:||6 months|
|Maintenance fee:||Typically $20/month|
|APR range:||11% – 39.9%*|
OnDeck offers traditional lines of credit, which means the line is not tied to any specific collateral or intended to be used for a specific purpose.
Credit lines are a maximum of $100K; you can draw from your line at any time. Term lengths are 6 months per draw, and you can repay early without penalty. Unlike their term loans, OnDeck’s lines of credit do accrue interest, so the earlier you repay, the more money you save.
Aside from interest, OnDeck has a $20 monthly maintenance fee, but no origination or draw fees. Additionally, if you withdraw at least $5K within the first five days of opening an account, the company will waive your maintenance fee for the first six months.
* According to OnDeck’s 2016 annual report
OnDeck has a very easy and fast application process.
To start the process, all you have to do is fill out an application on their website. According to the FAQ, this is the information they might ask for:
- Business Tax ID
- Credit card statements for the previous 3 months
- Bank statements for the previous 1 to 3 months
- Social Security number of business owner(s)
- Driver’s license number and state of issue
They’ll 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 normally 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.
Sales and Advertising Transparency
Over the years, OnDeck has gotten a lot of flack for their sales and advertising transparency. This lender famously did not sign the Small Business Business Borrower’s Bill of Rights, a bill created as an attempt for companies in the industry to self-regulate. The bill includes standards like sales and advertising transparency and the right to non-abusive products. Lenders like 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 their 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. Here is their own Code of Ethics.
As it currently stands, OnDeck’s website transparency is fair. Although they do 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.
In addition, you’ll know everything you need to before accepting the loan—the ILPA has recently introduced a SMART Box, a tool intended to help borrowers easily compare loan options, which clearly includes information such as the APR and the cents on the dollar cost for potential loans. While their website could provide a bit more information, you will know everything you need to know before signing the contract.
Customer Service and Technical Support
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 and knowledge of customer service, and like the personal bond they form with their representative.
Negative Reviews and Complaints
OnDeck is accredited on the Better Business Bureau, with an A+ rating. In the last three years, they’ve accrued a total of 38 complaints and 63 customer reviews (44 positive and 19 negative). Given the size of the company, this number of complaints is not especially large.
- High cost of borrowing: With effective APRs that can go all the way up to 99%, this lender’s loans can be far from cheap. For comparisons sake, lenders that offer more traditional term loans usually carry APRs that cap off at 36% maximum. While paying more for working capital is not the end of the world, I’d advise you to investigate other lenders if possible.
- Advertising transparency: Some customers have felt that they didn’t fully understand the true cost of the loan before accepting the offer.
- Daily repayments: In theory, daily repayments sound nice, because it means you don’t have to make a big old 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 alternate payment schedule, or refinancing your debt.
Positive Reviews and Testimonials
OnDeck has quite a few video testimonials on their website, along with a plethora of positive reviews on their Facebook, TrustPilot and Yelp pages. While OnDeck loans undeniably carry some problems, it’s clear that a lot of merchants are very happy 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
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!
Because OnDeck is willing to lend to less-than-qualified merchants, they might be just what you need to tide your business over until you’re qualified for financing at lower rates. While their loans can be expensive, OnDeck is clearly interested in educating the merchants and providing a pleasant user experience throughout the process.
However, I suspect many merchants just aren’t aware that they have other alternatives to OnDeck. If you meet this lender’s requirements, chances are you’re eligible for plenty of other services that may offer better rates and repayment terms. While you shouldn’t necessarily completely rule OnDeck out, it would behoove you to investigate some others before deciding on a loan provider.