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How to Get a Small Business Loan.
What are they?
Provider of short-term business loans from 3 months to 3 years.
How popular is it?
More than $5 Billion in loans to over 50,000 small businesses.
Who will qualify for a loan?
Must be in business for more than 9 months, have more than $75,000 in annual revenues, and have at least one business owner with a personal credit score above 500.
Who are they right for?
Businesses who need money fast and/or do not qualify for a traditional commercial or SBA Loan, and are willing to pay a high interest rate to get money.
Real estate, brokers, childcare, gyms, insurance, financial services, and dealerships, non profits, adult businesses, travel agencies. See complete list here.
Personal Guarantee required?
No, but OnDeck places a general lien on business assets. This means if you do not pay, they can come after any asset of your business.
Same day approval, and money in as little as 1 business day.
Where do they lend?
OnDeck offers loans in all 50 states and Canada, but not in US territories yet.
How much do they lend?
From $5K to $500K.
How much can I qualify for?
OnDeck typically lends 10 % to 15 % of your business’ annual gross revenue.
For how long?
Borrow for 3 months to 36 months.
Cost/Interest rate of loan?
The effective Annual Percentage Rate currently ranges from approximately 30 % to 50 % (see cost section for more information).
How do payments work?
Fixed payment is automatically debited from your bank account on a weekly basis or every weekday.
One-page loan application, business tax ID, merchant credit card processing statements for the previous 3 months, bank statements for the previous 3 months, social security number of business owner(s), your driver’s license number/state of issue.
There are 2 primary benefits of borrowing money from OnDeck.
- It’s relatively easy to get approved. In order to get a loan from OnDeck, you only need to be in business for 1 year, have $100,000 in annual business revenues, and a credit score above 500. That is significantly less stringent than what banks and other traditional lenders require.
- You get money fast. With OnDeck, you can be approved and have up to $500K in capital in your account in as little as 1 business day, although the typical time is 5 to 7 business days. That is much faster than banks and other traditional lenders, which typically take weeks or months, and OnDeck also requires a lot less paperwork.
The primary disadvantage to borrowing money from OnDeck is the cost. Effective annual interest rates range from 40% to 80% or more. That is multiple times higher than a bank, although still less than what you can expect to pay on a merchant cash advance. More on this in the cost section below.
- Personal Credit Score: Above 500
- Years in Business: At least 9 months
- Revenues: At least $75,000 annual revenue
- Industry Exclusions: Real estate, brokers, childcare, gyms, insurance, financial services, and dealerships, non profits, adult businesses, travel agencies (
see full list).
- Other Qualifications: No bankruptcy in the last 2 years. If you have other business loans, you must have paid off at least half of it and take out double the amount of the balance as on OnDeck loan (e.g. If you have a vehicle loan of $10,000, you must take out a $20,000 OnDeck loan).
Collateral Required? No. While OnDeck doesn’t require you to pledge collateral (e.g. business equipment), they do place a general lien on your business’ assets. It is legally more difficult for a lender to enforce a lien than it is to claim specific collateral. From a borrower’s perspective, however, the effect can be the same. If you don’t pay back the loan, OnDeck can sell off your business assets to satisfy the loan.
Personal Guarantee Required? Yes. OnDeck says they don’t report payment details to the consumer credit reporting agencies, so your personal credit score shouldn’t be affected by late payment or nonpayment. OnDeck can, however, come after your personal assets (e.g. car and house) if you don’t pay the loan. You are individually accountable for repaying the loan, even if your business closes down.
Upfront Fees – OnDeck charges 2.5% of the total loan amount as an origination fee. This is taken out when the loan is made (e.g. if you borrow $100,000 then you will receive $97,500 in your account once the loan closes).
Structure of Debts: Rather than quoting an Annual Percentage Interest Rate (APR), OnDeck quotes the total dollar amount you have to pay back. This makes it difficult to compare different loan types and providers. To help you make an easy comparison we have converted OnDeck’s quoted dollar cost into an APR in the cost section below.
Servicing Fees: None
Are interest rates variable? No
How Loan Costs Work With OnDeck
If you have a home loan or auto loan, you may have heard interest rates on those loans quoted as an Annual Percentage Rate (APR). APR is the cost of the loan over one year, expressed as a percentage.
OnDeck does not quote their loans in terms of an APR. Instead, they give you the total cost of the loan, which includes 2 things:
- Origination fee of 2.5% which OnDeck charges on all loans. Repeat borrowers get lower origination fees after the first loan. The origination fee is taken off the top when you borrow money. For example, if you borrow $100,000, you will receive $97,500 when the loan closes and the funds are deposited in your account.
- The dollar cost of the loan. OnDeck will tell you the total amount of money that you have to pay back by the end of the term.
While quoting things this way makes it easy to understand the total dollar cost of the loan, it does not make it easy to compare OnDeck loans with other loan products. To do that, you need to convert the loan cost into an APR. This can be done using the APR calculator below.
The APR range for an OnDeck loan is approximately 30-50 %. The average APR is currently 40.6 %. All else being equal, the longer the loan term, the lower the APR but the higher the total dollar cost (the amount of money that you have to pay back) of your loan.
The APR can be higher or lower than the typical range depending on your creditworthiness. Extremely creditworthy, repeat borrowers can get rates as low as 5.99 % APR. However, the number of borrowers actually getting this rate is probably quite small.
OnDeck prides itself on its fast and easy application process. It takes about 10 minutes to fill out the application and get approved. Once you complete the application, you are notified of the loan amount and terms for which you qualify and can access the funds from your account in as little as 24 hours. For larger loan amounts or other cases, the application system may direct you to speak to a rep. In that case, you can submit documents and get approved the same or the next business day. Once approved, the funds are available in as little as 24 hours.
What documents need to be provided? Previous 3 months of bank statements, previous 3 months of merchant credit card processing statements, business tax ID, social security number of business owners, and your driver’s license number/state of issue.
Do they need online access to any systems – Quickbooks, PayPal, bank accounts? Yes, they need access to your bank account.
Is there a credit report pull? If so at what point in the process? OnDeck pulls your personal credit report when you get to the end of the OnDeck online application process, or when you ask the loan representative to process your application. It’s a “soft” credit pull, so applying for a loan with OnDeck shouldn’t harm your credit score.
If so – What credit reporting service do they use? Equifax.
Does OnDeck report to the credit bureaus? OnDeck reports timely and untimely payments to the business credit bureaus, but not to the personal credit bureaus.
Loan Sizes and Terms
What is the minimum / maximum length of loan? The minimum term is 3 months, and the maximum is 36 months.
What is the minimum / maximum amount of the loan? The minimum amount is $5,000, and the maximum amount is $500,000.
Payment Methods & Schedule
- Schedule of Payments: Daily or weekly, depending on the loan you qualify for.
- Payment Initiation: Automatic deduction from your bank account.
- Method of Payment: ACH
- Penalties for Missing Payments: There is a $25 missed payment fee. If you miss multiple payments, the fee increases. This is outlined in the terms and conditions that you review once you’re approved for a loan.
- What Happens on Pre-Payment? There are no cost savings from early payment. Your repayment amount is the same, regardless of when you pay the loan off. Some other short term lenders, such as Kabbage, let you save money on fees by paying off the loan early.
OnDeck has has phone, live chat, and email customer support for borrowers and applicants. There is also an FAQ page on their website.
US-based or International? OnDeck is US-based with corporate HQ in New York.
Support Hours: Email support is available 24×7. Phone and live chat support are available Monday-Friday 8 AM – 8 PM EST.
Other Lending Products
In addition to term loans, OnDeck offers businesses a line of credit up to $100,000, which you pay back with weekly payments in 6 months or less. A line of credit is similar to a credit card. Once you pay off your balance, the credit is available to you again. OnDeck charges a $20 monthly maintenance fee for lines of credit, and the APR ranges from 13.99 % to 36 %.
Need some money for your business? Click here to get our FREE Guide:
How to Get a Small Business Loan.
The Bottom Line
If you can’t qualify for a traditional bank loan or need money fast and are willing to pay a high interest rate, then OnDeck may be a good choice for your small business. You can qualify for an OnDeck loan with a credit score above 500, 9 months in business, and $75,000 in annual business revenue. Once approved, you can access funds in as little as 24 hours.
The drawbacks of OnDeck are its high APRs and the fact that you can’t save money by pre-paying your loan. In addition, although OnDeck loans are cheaper than merchant cash advances, you can expect to pay a much higher interest for an OnDeck loan than a traditional bank loan or SBA loan.