Ondeck's Loan Ownership: Who Holds The Debt?

OnDeck Capital is an American small business lending company that provides its loans exclusively online. It was founded in 2006 and has since funded $15 billion in small business loans, working with over 150,000 businesses. OnDeck uses proprietary software to aggregate data about a business' operations, which is then processed by an algorithm that determines loan eligibility. The company has been criticised for its high interest rates, with an average loan having an annual interest rate of 51% in 2015. OnDeck does not offer peer-to-peer lending, meaning borrowers cannot borrow directly from individual or group investors.

OnDeck's high interest rates

OnDeck Capital is an American small business lending company that provides its loans exclusively online. It was founded in 2006 and has since been criticised for its high interest rates.

In 2015, OnDeck's average loan had an annual interest rate of 51%. This has earned the company comparisons to "payday lending for businesses". OnDeck's high interest rates are a drawback of the service, especially when compared to traditional lenders and other online lenders. The company's line of credit interest rates start at a 29.9% annual percentage rate (APR), with an average APR of 48.9%, which is higher than what most banks offer.

OnDeck's interest rates can range from 1.037 to 1.45 for term loans and 1.10 to 1.30 for lines of credit. These term loan factor rates translate to annual percentage rates ranging from 31.30% to 84.9%. These APRs also include origination fees on term loans and a $20 monthly maintenance fee on lines of credit. The maximum repayment term is 24 months, which can be a short amount of time to repay a loan.

Despite these high interest rates, OnDeck loans are a good option for fast, short-term financing, especially for business owners who cannot qualify for a bank loan. The application process is smooth and funds can be accessed with less-than-stellar credit. OnDeck's qualification requirements are more flexible than most banks, making it a terrific alternative lender.

Same-day funding

OnDeck is an American small business lending company that provides its loans exclusively online. It offers same-day funding for its loans through the Automated Clearing House (ACH) system. This electronic fund transfer system allows for the movement of money between banks within the same day, providing small business owners with faster access to capital.

The same-day ACH transfer service enables OnDeck to fund approved small businesses either instantly or on the same day. This is a significant improvement over the traditional ACH transfer process, which could take multiple days and lacked certainty regarding transaction arrival times in bank accounts. With the same-day ACH service, qualified customers can receive funds of up to $25,000 by 5:00 pm local time on the same business day they book or draw on their line of credit.

OnDeck's same-day funding option is particularly beneficial for small businesses facing payrolls or other financial obligations, where delays in obtaining funds and slow posting times can create challenges from a cash management perspective. By providing access to needed capital by the end of the business day, small businesses gain better visibility and predictability in managing their day-to-day cash flow.

To be eligible for a loan or line of credit with OnDeck, borrowers typically need a personal FICO score of 625 and must have their own business bank account. Additionally, their business must have been in operation for at least a year and generate at least $100,000 in annual revenue. It is worth noting that businesses located in North Dakota are ineligible for OnDeck funding.

While OnDeck offers the convenience of fast funding, it has been criticised for its high interest rates. In 2015, its average loan carried an annual interest rate of 51%. Therefore, while OnDeck provides easy qualification requirements and same-day funding, borrowers should carefully consider the potential costs associated with these loans.

Eligibility requirements

OnDeck is an online small-business lender offering term loans and lines of credit. The company is known for its flexible qualification requirements and its streamlined underwriting process. To be eligible for a loan or line of credit with OnDeck, you must meet the following minimum requirements:

• A minimum personal FICO credit score of 625.
• A business bank account.
• The business must have been in operation for at least a year and make a minimum of $100,000 in annual revenue.
• The business must not be located in North Dakota or operate in certain restricted industries, such as adult entertainment, drug dispensaries, firearms vendors, gaming and gambling, and rooming and boarding houses.

In addition to these minimum requirements, OnDeck may also consider other factors such as the business's credit score, the length of time the business has been operating, and the industry and size of the business. It is important to note that OnDeck does not require any specific amount, type, or value of collateral for its term loans. Instead, they secure their loans by placing a general lien on the assets of the business and are backed by a personal guarantee.

High borrowing costs

OnDeck Capital is an American small business lending company that provides its loans exclusively online. The company uses proprietary software to aggregate data about a business' operations, which is then processed by an algorithm that determines loan eligibility. OnDeck offers fast small-business loans and lines of credit for borrowers with a personal credit score of 625 or higher.

OnDeck has been criticised for its high borrowing costs. In 2015, its average loan had an annual 51% interest rate. Bloomberg BusinessWeek called OnDeck "payday lending for businesses", relying on brokers who were "less-than-scrupulous." The SMART Box, a model small business pricing disclosure, was launched in partnership with the Association for Enterprise Opportunity to empower small businesses to better assess and compare finance options.

OnDeck's term loans have an APR between 27.30% and 97.3%. Interest rates for lines of credit are only slightly lower, ranging between 29.9% and 65.9%. The average APR for an OnDeck line of credit is 48.9%, higher than what most banks offer. The high interest rates are a trade-off for the convenience of fast funding times and lenient minimum requirements. OnDeck is a good option for business owners who cannot qualify for a bank loan.

OnDeck's high borrowing costs can be attributed to the company's position as an alternative lender. Most banks have higher credit score and time-in-business requirements than OnDeck, making it a good option for startups that have been operable for less than a year. OnDeck's streamlined application process and minimal documentation requirements also contribute to the high borrowing costs.

Overall, while OnDeck offers convenient and fast funding options for small businesses, the high borrowing costs can be a significant drawback. Borrowers with strong credit ratings may qualify for better loan offers elsewhere.

OnDeck's collaboration with JPMorgan Chase

OnDeck Capital is an American small business lending company that provides its loans exclusively online. It was founded in 2006 and is headquartered in New York City. OnDeck uses proprietary software to aggregate data about a business's operations, which is then processed by an algorithm that determines loan eligibility.

In 2015, OnDeck and JPMorgan Chase announced a partnership, wherein OnDeck would provide its technology to JPMorgan to enable the bank to offer online loans to small businesses. This collaboration was a significant move for the marketplace lending industry, as JPMorgan Chase is the largest bank in the country, with $2.6 trillion in assets and close to $100 billion in revenue. The partnership allowed JPMorgan to leverage OnDeck's origination and loan servicing technology to provide small businesses with same or next-day funding. The bank set the underwriting criteria for the loans, which were branded as Chase products.

The collaboration between OnDeck and JPMorgan Chase was initially successful, with an extension announced in August 2017. However, in July 2019, JPMorgan Chase decided to end the partnership, choosing to continue offering online small business loans independently. This decision was a setback for OnDeck, as stated by its CEO, Noah Breslow.

Despite the collaboration's end, OnDeck continues to operate as a direct provider of business loans, known for its fast funding times and streamlined application process. The company has referral partners, including Intuit QuickBooks, Angie's List, Prosper Marketplace, Credit Karma, and WEX Inc., and it is a founding member of the Innovative Lending Platform Association (ILPA). OnDeck has received criticism for its high-interest rates, with an average loan carrying an annual 51% interest rate in 2015, leading to comparisons to "payday lending for businesses."

Frequently asked questions