OnDeck offers term loans and lines of credit for small businesses that don’t qualify for traditional term loans. Get funded quickly, sometimes as fast as the same day. Read on to learn about OnDeck’s small business loans, terms, requirements, and our thoughts on whether OnDeck is a worthwhile lender.
OnDeck Compared to the Best Small Business Loans
It can be tough to know which small business lenders are quality options. Fortunately, we’ve done the work for you, identifying the best small business loan options for you to choose from. While OnDeck is a quality lender, here are three other well-rounded options for securing funds:
Lendio connects you with over 75 potential lenders offering term loans, equipment financing, or any other type of business loan. Fill out a 15-minute online application today and access funding in as little as 24 hours after approval.
Bluevine offers revolving lines of credit up to $250,000 with relatively lenient credit score requirements. Apply online today to enjoy interest rates as low as 6.2% and get a decision in five minutes
SmartBiz offers a variety of business loans, but is best known for its accessible SBA-backed loan options. Apply now and see if you prequalify for an SBA loan up to $350,000.
OnDeck: The Good and the Bad
With any lender, you’re going to need to weigh the pros and cons of securing funding through them. OnDeck is no different—they have many qualities which can make them attractive to a small business owner, but there are some less attractive qualities to consider as well.
What OnDeck Is Good At
OnDeck is a terrific lender for new businesses that want to build a positive credit history, offering term loans and lines of credit with the possibility of same-day funding. The lender is transparent about its loan costs and connects small businesses with loan advisors to explore your loan options.
Easy qualification: OnDeck lets you choose between term loans and lines of credit, providing a standardized application process for both. This lender has lenient qualification requirements compared to traditional banks. You can qualify for a business loan with a credit score of 600 or better and one year in business. Most banks require a personal credit score over 680 and at least two years in business.
Same-day funding: Term loans from OnDeck up to $100,000 qualify for same-day funding. The best part is you don’t need to pay extra fees or special enrollment to qualify. You only need to complete your application by 10:30 a.m. EST. Then, if approved, you’ll receive the funds by 5 p.m. local time the same day. However, weekend and bank holiday applications don’t qualify for same-day funding.
Credit building: OnDeck reports your repayment activity to the three major business credit bureaus: Paynet, Equifax, and Experian. That makes this a great option for new business owners building credit, which in turn allows you to qualify for more loan options and lower interest rates in the future.
Fortunately, OnDeck doesn’t report your repayment history to personal credit bureaus. While honoring your payments is encouraged, there’s always the possibility of unexpected financial problems. In this case, your personal credit score won’t be affected if you can’t honor your loan terms. However, you will lower your business credit score in this event.
Access to advisors: The OnDeck loan application process is mostly automated, but you’ll speak to a loan advisor after filling out your application. The advisor will help you explore your loan options, explain how the loan is developed, and take you through the repayment process. It’s a great benefit, in case you’re in the dark about your creditworthiness or anything else about lending. And, you’ll be able to reach out to that loan advisor via phone, live chat, or email.
Transparent Pricing: OnDeck, CAN Capital, and Kabbage created the Innovative Lending Platform Association (ILPA). This initiative aims to make the lending process more transparent for small businesses. ILPA subsequently created SMART Box, a disclosure form that small businesses can use to compare loan prices, terms, and other loan particulars.
The SMART Box explains key terms and provides information to help evaluate potential loan offers. The document is critical for assessing the total cost of a loan offer from OnDeck so that you can make an informed borrowing decision. But it’s a big benefit; few other lenders make understanding all the associated costs of a loan this easy.
What OnDeck Is Lacking
OnDeck, like many other lenders, has some restrictions and elements that may not make it a good fit for your needs. Take a look at these and assess whether any of these drawbacks outweigh the benefits of OnDeck for you.
Unavailable in some states: OnDeck doesn’t provide financial services in all 50 United States. Businesses based in North Dakota, South Dakota, or Nevada are unable to secure funding through OnDeck.
Short repayment period: Unlike many other lenders, OnDeck doesn’t offer monthly repayments. You’re limited to either daily or weekly repayments—which presents a much shorter turnaround time on repaying your loan.
This isn’t a problem for a business with solid cash flow but, then again, not every business securing a loan or line of credit has that luxury. Some small businesses may struggle with frequent payments and the short loan terms of just 12 or 24 months.
High interest rates: OnDeck is a viable lender for small businesses that don’t qualify for traditional loans. But, part and parcel to that is higher interest rates. OnDeck’s term loans have an APR between 29.9% and a whopping 97.3%. Interest is equally high for lines of credit, ranging between 29.9% and 65.9%.
You can also expect a monthly maintenance fee for lines of credit. Again, OnDeck is a good option if you don’t qualify for bank loans. However, you’ll get a better deal elsewhere if you meet the qualification criteria for banks or other lenders.
OnDeck Options and Pricing
OnDeck offers two lending options for you to choose from. Let’s delve a bit more into both and their associated costs.
OnDeck Line of Credit
OnDeck offers lines of credit to small businesses. You can secure between $6,000 and $100,000 on a revolving line of credit, meaning that funds replenish as you repay your loan. Additionally, you only pay interest on the cash you use.
It’s a terrific solution for quickly bridging a cash flow shortfall or accessing working capital. Use the funds for common needs such as hiring employees, covering payroll, or paying vendors and suppliers.
You can access the funds immediately after withdrawal, including after banking hours and on weekends. Most other lenders make you wait one or more business days to actually access the funds. To sweeten the deal, OnDeck doesn’t charge extra for instant funding on loan amounts between $1,000 and $10,000. Similarly, OnDeck offers same-day ACH withdrawal for transactions up to $25,000.
In addition, you can enjoy same-day withdrawal by drawing funds between 10:30 a.m. Eastern on the day of, or by 7 p.m. Eastern the previous day. However, this benefit is only available in select states.
OnDeck’s line of credit comes with a 12-month repayment term. However, this term resets every time you draw from your credit line. Additionally, the company consolidates each draw into one loan. You can choose between daily or weekly payments.
Like most lenders, OnDeck also charges a standard one-time origination fee and monthly maintenance fee. The origination fee is $20, and it’s another $20 for the monthly maintenance fee. Otherwise, you don’t have to worry about additional charges such as prepayment penalties or draw fees.
Furthermore, OnDecks line of credit has relatively lenient minimum requirements:
- At least one year in business
- A minimum FICO score of 600
- A business checking account
- At least $100,000 annual revenue
Most banks have higher credit score and time-in-business requirements than OnDeck, making it a terrific alternative lender.
In order to fully assess your creditworthiness, OnDeck uses some or all of the following criteria to qualify applicants:
- Personal and business credit scores
- Public records
- Cash flow
- Years in business
- Percent of business owned
- Total debt
- Repayment history
OnDeck’s line of credit interest rates starts at a 29.9% annual percentage rate (APR). However, the actual interest rate depends on various factors such as personal and business credit scores, annual revenue and cash flow, and time in business. The average APR for an OnDeck line of credit is 48.9%, higher than what most banks offer.
Applying is easy. First, you’ll need to complete the online application. You can also call OnDeck to apply on the phone. Either way, you’ll be requested to provide details, such as the last three months of business bank statements, Business Tax ID (EIN), and a current statement of your financial activity.
Next, an OnDeck loan advisor will get in touch with you, usually within one business day. This financial expert will discuss your options and explain the details, such as terms, amounts, and payback schedules. Then, if you’re happy, you can proceed to checkout online.
OnDeck Term Loan
OnDeck also offers customizable short-term business loans. The qualification criteria are the same as with OnDeck’s lines of credit. The OnDeck team will assess your personal and business credit scores, annual revenue and cash flow, and time in business to determine the interest rate.
The interest rate for short-term loans starts at 29.9%. However, the average interest rate for OnDeck term loans is 62.1% APR.
Also similarly to the lines of credit, OnDeck’s small business loans have a short repayment period. You’re limited to the daily and weekly payments. However, the lender will come up with a reasonable figure depending on the financial information you provide in your application.
OnDeck payments remain the same for the entire repayment term, so you don’t have to worry about variable interest rates, or higher interest at the beginning of your term. The predictable payment schedule and amount are ideal for accurately managing your cash flow.
There’s also the option for same-day funding for term loans up to $100,000. Submit your loan application before 10:30 a.m. Eastern to receive the funds by 5 p.m. local time on the same day. Otherwise, the typical funding time for term loans is between two and three business days.
While OnDeck doesn’t technically impose a prepayment penalty, repaying your loan early isn’t the best option. You’ll still owe 75% of the outstanding interest rate. However, you can avoid this charge by enrolling in OnDeck’s Prepayment Benefit program. The program allows you to save on interest if you repay your loan early.
OnDeck in Summary
OnDeck offers a critical lifeline for small businesses that don’t qualify for traditional bank loans. And, with the promise of same-day funding, it’s a top choice for a small business looking for quick working capital or immediate access to a short-term loan. You also get access to a loan advisor and the Smart Box tool to help you make an informed decision.
OnDeck isn’t without its drawbacks. You can expect higher interest rates and more frequent payments than most bank loans. However, these downsides are easy to overlook, given the possibility of borrowing up to $250,000 with relatively lenient qualification criteria. And, with a smooth application process, accessing funds with less-than-stellar credit is easier than ever.
That being said, securing a small business loan is a heavy decision to make. Make sure you weigh all of your options. We think Lendio and Bluevine are great other options for term loans and lines of credit, respectively, while SmartBiz is the best way to get an SBA-backed loan. And, check out our full post on the best small business loans available today to scout out even more alternatives to OnDeck. – Best quick cash injection for B2B businesses
