OnDeck Small Business Loans
If you don't qualify for a bank loan or if you are looking for a short term loan with quick processing OnDeck may be a good option. OnDeck is a lender that exclusively works with 3 month to 3 year loans for small businesses. Like some other alternative lenders, they offer the unique option to qualify you based on several factors instead of just looking at your credit score.
Besides your personal credit score, OnDeck will look at your business's annual revenue. This is great for anyone who has medium to low credit but has still managed to run a successful business. However, in order to qualify you must have at least one year of business under your belt. Because of this, it is not a viable option for anyone who is looking for funding for a brand new business but it is good for expanding current businesses.
Compared to other similar lenders, OnDeck offers relatively high small business loans, from $5,000 to $500,000 in their short-term and long-term categories. In exchange for their quick qualification process and alternative qualifying criteria you may find higher interest rates than with typical bank loans. Terms only last between three months to three years, so be sure that you can afford the overall cost before taking out a loan.
OnDeck also offers business lines of credit of up to $100,000 with APRs as low as 13.99%. When your business requires flexible working capital, draw the cash you need and deposit electronically to your business checking account at any time. Only pay interest on the funds you draw. Pay back your balance early any time.
Details of OnDeck Business Loans
OnDeck can loan your business between $5,000 and $500,000 over a period of 3 to 36 months. You can make fixed payments on your loan on a daily or weekly basis. There are two different loan categories. First, there is the short term loan of up to $500,000 over a 3 to 12 month term, and long term loans of up to $500,000 over a 3 to 36 month term.
Short terms loan are intended to finance projects that have an immediate return on investment, such as marketing campaigns, seasonal hiring or inventory deals with a quick turnaround. Interest rates are as low as 9% total interest percentage, with an average rate of about 19%.
OnDeck calculates "total interest percentage" as the total interest on your loan as you pay it back.
On their short term loans of 12 months or less, the total interest percentage allows you to easily see the total payback amount of the loan. You can think of it as fixed simple interest.
For example, a $10,000 loan over 6 months with 9% total interest percentage and weekly payments, the total payback amount is $10,900 including interest of $900.
The long term loans are targeted at funding projects that pay back over a longer term. This includes equipment purchases, expansion and new locations, new product development and large scale inventory financing. The lowest rate available is a 5.99% annual interest rate, with an average rate closer to 30%.
OnDeck uses the term "annual interest rate to calculate the yearly interest percentage on an average loan balance. The rate does not include fees.
For example a $100,000 loan over 24 months with a 5.99% annual interest rate, the interest cost is $6167, a loan payback amount totaling $106,167.
OnDeck does charge a loan origination fee. For a first OnDeck loan, the fee is 2.5% of loan amount. A second loan incurs a fee of 1.25% of the loan amount, with a third OnDeck loan costing your business a fee of 0 – 1.25% of the loan amount.
To qualify for the lowest rates, you'll need proven cash flow and an excellent payment history with previous OnDeck loans. Other factors affecting your rate include your business and personal credit, number of years in business and the specific industry your business operates in.
The lender requires no collateral, but they do ask for a personal guarantee, making owners responsible for repayment even if the business fails. OnDeck loans originate under California, Virginia or Utah law, depending on your business location.
The Loan Application Process
OnDeck offers a straightforward loan application process. You can apply quickly online or via phone. They claim you can be approved and funded within 24 hours.
For a quick turnaround on your loan, it's best to get your documentation ready prior to applying. OnDeck want to see three months of credit card statements for businesses that accept cards, as well as your business banking statements. They also want a copy of your business tax license. All applicants must show their social security number and driver's license. Depending on your business, they may ask for additional documentation, such as a property lease agreement or title deed.
OnDeck loans to businesses that have been around for at least one year, with at least $100,000 in annual sales. The owners must have a minimum FICO score of 500. Cash flow is the key indicator of creditworthiness to OnDeck. If your business has great cash flow, OnDeck would love to tap into it.
A lien or judgment against you or your business will likely disqualify you for a loan from OnDeck.
For many borrowers, OnDeck debits your payments on a daily or weekly basis, making payments manageable. If your cash flow varies, this can be easier than a big monthly debit. OnDeck also has lower loan origination fees than many competitors. The trade off is that their interest rates can be quite high.
OnDeck was founded in 2006 and has an A+ rating with the BBB. Recently they have expanded into Australia and Canada. OnDeck's founder Mitch Jacobs has a background in financial software. He founded a merchant payment system at Dartmouth college in 1993. The company went public in December, 2014.
Verdict - Great
This is another good option for anyone who is looking for an alternative to their local bank with a quick application process. However, interest may be higher than a typical bank loan. As payment terms are on the short side, be sure you can afford the high monthly draw on your cash flow.