- Relaxed borrower qualifications
- Relaxed credit score requirements
- Competitive terms and fees
- Short application process
- Excellent customer support
- Prepayment discounts
- Potentially high factor rates
- Opaque advertising
OnDeck is a hugely prolific online small business 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 can only take minutes. Currently, OnDeck offers two types of business loans: short term loans and revolving lines of credit.
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 be expensive and difficult to repay.
Both stances have some truth. Even now, OnDeck still has some of the most lax borrower qualifications on the market (though their average customer has been in business for at least seven years, makes more than $450,000 in annual revenue, and has a FICO score of 660 and up). On the other hand, the short time to funding, the wide range of merchants who can use OnDeck, and other attributes work to drive up the price of the loans.
To put that in perspective, according to OnDeck’s 2018 Q2 report, their short-term loans typically have APRs that range from 9.4% – 99.7%, and line of credit APRs range from 11% – 63.2%. Naturally, however, the rate you’re personally offered will depend on the strength of your business.
Because OnDeck’s loans tend to be more expensive than their competitors, you may want to make some comparisons before settling on a lender. That said, if you need a fast loan or don’t qualify elsewhere, its hard to beat OnDeck. Despite the potential drawbacks, OnDeck is transparent, the customer service is easy to get in touch with, and overall most customers report positive experiences.
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.
Table of Contents
- 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|
|Personal Credit Score:||600|
|Business Revenue:||$100,000 per year|
Additionally, you must make at least 5 bank transactions per month, and your business cannot be in one of these restricted industries.
Terms & Fees
OnDeck offers short-term loans and lines of credit to eligible borrowers.
These are the terms and fees for OnDeck’s short–term loans:
|Borrowing Amount:||$5,000 - $500,000|
|Term Length:||3 - 36 months|
|Factor Rate:||x1.003 - x1.042 per month|
|Origination Fee:||0% - 4%|
|Effective APR:||9.4% - 99.7%|
Learn more about effective APRs
|Collateral:||UCC-1 blanket lien, personal guarantee|
Aside from the factor 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.
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. The amount you have to repay is only calculated once; factor rates don’t compound like interest. For example, if you have a factor rate of x1.19, and you are borrowing $50,000, you will have to repay $59,500 in total ($50,000 x 1.19 = $59,500). OnDeck’s factor rates range from about x1.003 to x1.042 per month (according to their Q2 2018 report), depending on the borrower’s term length and creditworthiness. Payments are made on a daily or weekly basis.
As reported by OnDeck’s quarterly earnings report, loans carry an effective APR between 16.7% and 99.4%. 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 on short-term loans and APRs.
Lines Of Credit
Here are the stats for OnDeck’s lines of credit:
|Borrowing Amount:||$6,000 - $100,000|
|Draw Term Length:||6 months|
|Maintenance Fee:||Typically $20 per month|
|APR:||11% - 63.2%|
OnDeck offers revolving lines of credit. Their credit lines are not tied to specific collateral or intended to be used for a specific purpose.
Credit lines are a maximum of $100,000; 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 $5,000 within the first five days of opening an account, the company will waive your maintenance fee for the first six months.
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
- Bank statements for the previous few 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 & 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.
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 & Technical Support
Customer service is available by phone, email, or live chat. You can also get in contact via their Facebook or Twitter, or find the answers to basic questions in the FAQ located on the OnDeck 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 and knowledge of customer service, and like the personal bond they form with their representative.
Negative Reviews & 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.
The company also has reviews on Facebook, TrustPilot, and Google. Here are the most common complaints leveled against OnDeck:
- High cost of borrowing: With effective APRs that could reach up to 99.4%, 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 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, they will 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 alternate payment schedule, or refinancing your debt.
Positive Reviews & Testimonials
OnDeck has quite a few video testimonials on their website, along with a plethora of positive reviews on their Facebook, TrustPilot and Google 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 merchants with credit scores as low as 600, they 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.