An OnDeck line of credit is an unsecured revolving loan up to $100,000 which can be used repeatedly once it’s repaid. A small business line of credit can help cover expenses like payroll and utilities, and it can be used to free up cash flow to offer terms to customers or discounts from vendors.
OnDeck Line of Credit at a Glance
|Line of Credit Amount||Up to $100,000|
|Repayment Term||Six or 12 months|
|Business Owner Credit Score||At least 600|
|Time in Business||One year or more|
|Gross Annual Revenue||$100,000 or higher|
|Application and Funding Speed||15 minute application, approval within hours and funding the next day|
*Weighted average APR disclosed by OnDeck based on loans originated in the quarter ending June 30, 2018.
What a Small Business Line of Credit Is
OnDeck offers a small business line of credit, which is a type of revolving financing. Like credit cards, you can draw funds up to an established credit limit as often as needed. When you repay the draw, you can borrow it again, and interest is owed only on borrowed funds. Besides a small business line of credit, OnDeck also offers a term loan.
The term loan offered by OnDeck is on our list of the best short-term business loans and lets you borrow up to $500,000 at a starting interest rate of 9.99%. Not only can you borrow more with the term loan than the small business line of credit, you can also get up to 36 months to repay it. This makes it a great alternative or additional funding option for small businesses that have large one-time expenses like renovations.
Who an OnDeck Line of Credit Is Right For
An OnDeck line of credit is great for businesses needing funding for recurring working capital needs, unexpected expenses, and seasonal shortfalls. Businesses that are growing can also use it to offer terms to customers, pay off vendors early, or cover the initial expenses for growth projects like marketing. Small business owners can also benefit from the quick application and funding process.
An OnDeck line of credit is right for:
- Businesses needing to cover for recurring working capital: Lines of credit can be used to cover working capital expenses like payroll, inventory, and utilities. This frees up your cash flow and allows you to offer terms to your customers while also allowing you to take advantage of early payment discounts from your vendors.
- Business owners wanting credit for unexpected scenarios: Although some of your business and operations may be predictable, there is always something unexpected that can happen. Whether it’s repairs or other expenses, having access to an unsecured business line of credit when you need it can be a great relief for business owners.
- Seasonal businesses: Businesses experiencing seasonality need a revolving line of credit for expenses like payroll and utilities. While revenue isn’t coming in, the revolving line of credit can be used to finance expenses. Once the business gets busy again, you can pay it off quickly and have it ready for the next season.
- Business owners needing funding the next business day: Traditional lenders can take weeks to fund your small business line of credit. OnDeck offers fast business funding that starts with a 15-minute application. You’ll receive a credit decision the same day and funding the following business day, letting you focus on your business.
Most businesses use a revolving line of credit for working capital expenses. Applying for an OnDeck line of credit is convenient, and funding is faster than with traditional lenders. With OnDeck, smaller businesses and business owners without excellent credit scores can qualify for funding in as little as one business day. However, an unsecured business line of credit isn’t always the best solution, and there are several alternatives to an OnDeck line of credit.
When to Consider an Alternative to an OnDeck Line of Credit
Although an OnDeck line of credit is versatile, sometimes there’s a better alternative. If you have prime credit (personal credit score of at least 700) and strong business revenues, you may qualify for lower rates with traditional lenders. If you don’t meet the minimum qualifications set by OnDeck, you can work with a different lender, some of which offer other financing options like invoice factoring.
Consider an alternative to an OnDeck unsecured business line of credit if your business:
- Prefers a low interest rate and has owners with prime credit: Business owners with prime credit above 700, strong revenues, and several years in business can qualify for a traditional business line of credit from a bank. While funding can take up to four weeks, APRs typically start at 9%.
- Invoices B2B or B2G customers or needs more funding: You can receive up to 90% of your business-to-business (B2B) or business-to-government (B2G) invoices with invoice factoring. BlueVine offers factoring up to $5 million per month, and compared to OnDeck, BlueVine also has a revolving line of credit up to $250,000.
- Has gross annual revenues of less than $100,000: If your business generates less than $100,000 in annual revenues, then Kabbage may be a good option. This is because Kabbage only requires businesses to have $50,000 in annual revenues.
- Wants no minimum personal credit score requirement: If your personal credit score is preventing you from getting funding for your business, consider a bad credit business loan. One online lender with no minimum credit score requirement is Fundbox, which offers up to $100,000 in funding.
- Operates in the ecommerce space: If your business operates in ecommerce and sells on platforms like Etsy, Walmart, or Amazon, an unsecured business line of credit from an online lender like Payability may be a better option. This is because it can integrate with your ecommerce account and approve you more quickly.
As a business owner, there are multiple options for financing. Selecting the best option for your business depends on your qualifications and industry. Ecommerce businesses and those that invoice B2B or B2G customers can use more specialized lenders. If you’re unable to meet minimum qualifications, there are also lenders with lower requirements.
OnDeck Line of Credit Rates & Fees
The OnDeck line of credit has a starting APR of 13.99%. It is reserved for prime borrowers with credit scores exceeding 700 and solid business revenue. OnDeck is transparent and discloses its average weighted APR as 32.6% in its 2018 annual report. There is no prepayment penalty or origination fee, but there is a $20 monthly maintenance fee, which can be waived for six months.
With an APR of 13.99%, a $10,000 one-year draw on an OnDeck line of credit will cost approximately $1,400 in interest. In some cases, by repaying your loan early, you can receive a prepayment discount. If you plan on repaying early, you should contact your designated specialist at OnDeck and request a discount, and make sure to have a date in mind when the loan will be fully repaid.
OnDeck Line of Credit Repayment Terms
Businesses can receive a small business line of credit up to $100,000 from OnDeck. Funds can be drawn as needed, but each draw needs to be repaid over six or 12 months via weekly payments. Once the principal is repaid, it can be reborrowed, allowing you to potentially borrow more than $100,000 over several draws.
Although weekly payments may seem frequent compared to traditional lenders that offer monthly repayment, it is often better for the business. By making more frequent payments, it is easier to manage cash flow, and the payments are smaller. This means that there is no need to put away money for a large monthly payment.
OnDeck Line of Credit Qualifications & Other Requirements
To qualify for an OnDeck line of credit, your personal credit score must be at least 600. Your business also needs to be operating for at least a year in one of the 700 industries serviced by OnDeck to qualify. OnDeck also works with businesses that have been operational for at least one year and have annual gross business revenue of at least $100,000.
Although these are the minimum qualifications, OnDeck has shared some additional information about its average borrowers on its website. OnDeck’s median customer has been in business for seven years, has gross revenues over $450,000, and most of its customers have credit scores of at least 660. There are also some industries restricted by OnDeck from getting funded, including adult entertainment, drug dispensaries, and religious organizations.
OnDeck Line of Credit Reviews
OnDeck has positive reviews based on a comprehensive search of reviews all over the web. Customers who left positive reviews of OnDeck were happy with the terms they received. They also appreciated having a dedicated loan specialist for the life of the small business line of credit. The negative reviews we found were mostly from customers who misunderstood the fees or weren’t approved for funding.
From our observation and analysis of negative reviews in particular, we noticed that OnDeck was quick to address any complaints and works hard with customers to ensure they have a great experience.
How to Apply for an OnDeck Line of Credit
Applying for an OnDeck line of credit is simple. Start by submitting personal and business information via its quick online application. Then connect your bank account or upload three months of recent bank statements. You can get approved in as little as a few hours. This means you could make your first draw and have money in your account as soon as the next morning.
Pros & Cons of an OnDeck Line of Credit
You don’t need perfect credit to qualify for an OnDeck line of credit, and your business can be relatively small and new when you apply. However, OnDeck only offers up to $100,000 in funding with up a year for repayment, which may not be enough. You can get lower rates with traditional lenders, but OnDeck offers next day funding and a 10-minute application.
Pros of an OnDeck Line of Credit
The pros of an OnDeck line of credit are that:
- Business owners with a fair personal credit score can qualify: If your personal credit score is at least 600, you can qualify for an OnDeck line of credit. This allows small business owners who may not qualify with a traditional lender that requires a credit score of 700 or greater to access funding.
- Newer and smaller businesses can qualify: With one year of business operations and $100,000 in annual revenue, your business can get an OnDeck line of credit. This is lower than most traditional lenders and some online lenders, giving smaller and newer businesses an opportunity to receive funding.
- Funding is available as quickly as the next business day: With OnDeck, you can avoid waiting the three to four weeks it takes to get approved and funded from a traditional lender. Instead, you can complete an online application in 10 minutes, and, if approved, receive funding as soon as the next day.
Besides being able to qualify with a fair credit score, your business can also be newer and smaller when you apply for an OnDeck line of credit. Other benefits, like being able to get a term loan or reusing your line of credit from OnDeck, are also worth considering. You’ll also enjoy having a loan specialist available to assist you. However, there are downsides to an OnDeck line of credit to consider.
Cons of an OnDeck Line of Credit
The cons of an OnDeck line of credit are that:
- The maximum credit limit is only $100,000: An OnDeck line of credit only extends up to $100,000; however, you can also qualify for its term loan up to $500,000. If you need more funding and invoice your B2B or B2G customers, consider accounts receivable (A/R) financing for larger funding from the best A/R financing companies.
- Business owners with poor credit cannot qualify: If your personal credit score is below 600, you cannot qualify for an OnDeck line of credit. However, you can apply for a no minimum credit business loan, provided by Fundbox up to $100,000. It also offers fast funding and weekly payments, but loan terms only extend up to six months.
- The repayment terms are short: An OnDeck line of credit must be repaid in six months or a year. This makes individual payments larger and restricts the size of projects that can be funded. There are several alternative business loans with longer terms, including a term loan from OnDeck up to $500,000 with three-year repayment terms.
Most cons of an OnDeck line of credit are related to its minimum qualifications. Not being able to make monthly payments can also be detrimental for some businesses. You should also consider applying for a line of credit from a traditional lender. You may get better rates than OnDeck can offer, but it will take longer to get funded.
OnDeck Line of Credit Frequently Asked Questions (FAQs)
Can you use an OnDeck business line of credit for personal expenses?
An OnDeck business line of credit (LOC) isn’t intended for personal expenses. Plus, interest paid on financing for personal expenses isn’t tax deductible. If the IRS finds you’ve used a business line of credit to pay for personal expenses, you could have significant negative tax consequences. These are some reasons why you shouldn’t commingle business and personal expenses.
How do I increase my business line of credit?
With most traditional lenders, you will need to request a credit increase. They will look for increasing revenue, improved credit score, and a history of on-time payments to approve you for the increase. Some online lenders, like OnDeck, will automatically review your account to see if you are eligible for an increase.
Does a business line of credit affect personal credit score?
A business line of credit can affect your personal credit score. Some lenders, like OnDeck, only perform a soft credit check when you apply, so applying doesn’t affect your score. However, once you receive a funding offer and accept it, these lenders may perform a hard credit check, which could impact your personal credit score.
An OnDeck line of credit is best for business owners needing recurring working capital. It allows business owners with personal credit scores of at least 600 to qualify. As long as the business has been operational for at least a year and is generating at least $100,000 in annual revenue, you can potentially qualify for funding. OnDeck has fast funding speeds and offers weekly payments, which help small business owners manage their cash flows.