OnDeck Small Business Loans Review: Is OnDeck a Good Lender?

By Daniel Lewis
Advertiser disclosure

OnDeck is one of the leading platforms when it comes to online lending – they are the most well known and have a stellar reputation, unlike many operators in the space. OnDeck was founded in 2006 by entrepreneur Mitch Jacobs. It is headquartered in New York City and also has offices throughout the USA as well as Sydney, Montreal, and Toronto.

OnDeck, a subsidiary of OnDeck Capital, provides a fully automated loan service to small businesses. Its mains offerings are term loans and business lines of credit. Customers can make use of the streamlined OnDeck application process without having to go for a physical interview in person. The lender has facilitated over $13 Billion in loans globally.

OnDeck was one of the first automated online lenders and maintains a strong position as one of the best. It is partnered with Intuit QuickBooks, Angie’s List, Prosper Marketplace, Credit Karma, WEX, and Wave Accounting. It is a founding partner in the Innovative Lending Platform Association (‘ILPA’). The ILPA is responsible for launching the ‘Smart Box’ lending feature, now an industry standard.

The Smart Box clearly displays the rates consumers will play for a loan, which can strengthen the decision making power of small business enterprises. Transparency is a vitally important factor in the loan industry and OnDeck played a major role in making the area more transparent.

Highlights

requirments_icon1Loan Amount
$5,000 – $500,000

Terms
Up to 12 – 36 months

Funds received
24 hours

Pros

  • Easy Application Process
  • Transparent Terms and Conditions
  • Excellent Customer Service

Cons

  • High-Interest rates

Ondeck Capital Website

Advantages of OnDeck

OnDeck is one of the most transparent online lenders in the market. Clients will know exactly what they qualify for, what the interest rate is, and what the fees are for late payment. The lender is built around transparency. They also report credit payments to the appropriate bureaus so you can build your credit rating fast (not all online lenders do this).

OnDeck offers a larger maximum term loan in comparison to most other online lenders. The typical average maximum is $250,000, while OnDeck offers loans up to $500,000. They also offer a higher line of credit at $100,000. As one of the most trustworthy lenders in the market, there is nothing to worry about in terms of extra fees or hidden charges. Once you qualify, you can rely on OnDeck to carry out their end of the bargain.

Another benefit of using OnDeck is the smooth application process. After you have filled out a short questionnaire, an OnDeck representative will reach out to discuss your available loan options. After this, the money can be in your account within one business day. The application process itself only takes 10 minutes to complete and the time taken from application to funding is usually less than a week.

Of all the OnDeck advantages, the biggest would have to be its fantastic customer service team. The lender has outstanding online reviews and this is mainly due to the quality of care exhibited by the representatives. You will be talked through each step of the process and if anything crops up, you can ask for a change or modification. Needless to say, this is not a common phenomenon within the lending industry.

Get a Business Loan With OnDeck Within 24h!

Disadvantages of OnDeck

Of course, the obvious tradeoff with an online process and one day financing is that the rates are going to be steep. This is inevitable, and something that each small business is going to need to personally evaluate. The weighted average APR for OnDeck term loans is 49.06% while the weighted average for lines of credit is 35.2% 

The figures are gathered from the last quarter of 2019 and such rates are very high. However, for businesses with stronger fundamentals, the rates can go as low as ~10% for both lines of credit and term loans. On a more positive note, OnDeck is one of the few lenders that actually discloses the weighted average, while others advertise lower range figures.

OnDeck is also a lot more stringent in terms of eligibility requirements. Businesses will need to have more capital, a longer inception timeline, and a higher credit rating for the purposes of qualification. However, it’s still better than banks in this regard, who often don’t work with businesses that have a credit score lower than 720.

Loan Features

OnDeck offers two loans – the term loan and the line of credit. The term loan is a lump sum paid upfront with fixed repayment terms. The line of credit is finance on demand. It can be drawn upon and repaid as needed. Generally, the term loan is used for a specific purpose or as a working capital loan. The line of credit is more often used by seasonal businesses with irregular cash flow or for a business that wants extra capital for smaller expenses, just in case of a liquidity trap.

It’s important to understand that the OnDeck loan is deducted from your balance daily or weekly, not monthly. So make sure you have some capital in your account each and every day (or week) to pay off this deduction. Alternatively, you will incur a late payment penalty. The line of credit is weekly, the term loan is either daily or weekly (depending on your circumstances).

Loan TypeTerm LoanLine of Credit
APR Average49%35%
Amount Range$5,000 – $500,000$5,000 – $100,000
Term Length3 – 36 Months12 Months
Funding Time24 Hours24 Hours

Fees, Rates, and Penalties

As previously mentioned, the rates for OnDeck tend to be quite high in terms of the APR. But the rates are clear at the outset. In addition, OnDeck has no prepayment penalties (a rarity in the market), meaning people can pay off their term loans quickly. However, there is little benefit in doing this, as the total repayments are fixed.

The origination fees for OnDeck terms loans between 2.4% – 4% on your first loan. This fee drops to 1% – 3% for the second loan and 0% – 3% for the third loan. The maintenance fee for the line of credit is $20.

Loan TypeTerm LoanLine of Credit
Origination Fees2.4% – 4.0%No
Prepayment FeesNoNo
Late Payment FeesYesYes
Maintenance FeesNo$20
Interest Rate Range12% – 99%11% – 99%

OnDeck Eligibility Requirements

OnDeck eligibility requirements are a little higher in comparison to other lending platforms. The minimum FICO credit score is 600, while other providers frequently offer credit scores as low as 550 or no minimum at all. The annual revenue is a lot larger than most, at $250,000 instead of a more standard $100,000. And the time in business is most often 12 months instead of the 36 months stipulated by OnDeck.

Something to keep in mind is that OnDeck has recently raised its requirements – older reviews refer to the lower OnDeck requirements in terms of minimum annual revenue and minimum time in business. While it used to be $100,000 and 12 months in business, this is no longer the case.

In addition to the eligibility requirements listed below, applicants will need to have a business bank account, be located in the USA (unless applying in Australia or Canada), and be in a relevant industry. Loans to certain industries, such as munitions, gambling, entertainment, credit lending, etc, are illegal for online lenders such as OnDeck. A personal guarantee is required and you cannot have had any recent bankruptcy (within the last 2 years).

CriteriaTerm LoanLine of Credit
Minimum Credit Score600600
Minimum Annual Revenue$250,000$250,000
Minimum Time in Business36 Months36 Months
Read our comparison: OnDeck vs. Kabbage to understand which lender is better for your business.

The OnDeck Application Process

The OnDeck application process is very streamlined, like many online lenders. You fill in some basic details online, and a representative will get back to you within one business day. However, it is not 100% automated like certain other online lenders. With OnDeck, you have to wait for a reply and talk to a representative. With other lenders, you simply connect your account details to a software platform and the funds are automatically delivered to your account.

However, this is not exactly a ‘flaw’. It is a nice touch as the customer service and the loan consultants are professional and customer orientated. This establishes a good relationship. OnDeck is not like other loan providers, where you could encounter rude service or be put on hold for hours on end. The team is easy to reach out to and happy to facilitate. This makes all of the difference.

To start an application process, all you need is 3 months of recent bank statements, along with the basic details (business tax ID, social security number, driving license number, etc).  That’s it. A representative will be with you within a day or two and you can get funded quickly after that. Sometimes you may be required to supply additional documentation but this is the exception, not the rule.

Get a Business Loan With OnDeck Within 24h!

Transparency

OnDeck has a Triple-A rating with the Better Business Bureau (‘BBB’). It is one of the most transparent lenders in the market. It had a hand in developing the industry-standard Smart Box model, which empowers small businesses and lets them compare loans side by side. All fees are displayed upfront using the Smart Box model and there are no hidden charges with this lender.

OnDeck actually goes one step further in terms of transparency. They educate the lender in terms of what questions to ask before accepting a loan. The 5 recommended questions are:

  1. What is the Total Cost of Capital?
  2. What is the Total Annual Percentage Rate?
  3. What is the Average Monthly Obligation?
  4. What is the total amount of Interest Paid per Dollar?
  5. Are there any Prepayment Penalties?

OnDeck is a subsidiary of OnDeck Capital. It employs over 500 people, is listed on the NYSE stock exchange (‘ONDK’), and has its headquarters in New York. It also has US offices in Colorado and Virginia, as well as Toronto and Montreal. The CEO of OnDeck is Noah Breslow while the CFO is Kenneth Brause (the original founder, Mitch Jacobs, left in 2012). Its new Chief Technology Officer, as of January 2020, is Scott Totman.

The bank used by OnDeck to generate the loan is known as Celtic Bank, registered in Utah (a different bank will likely be used in Canada and Australia). All deposits are insured by the Federal Deposit Insurance Corporation (‘FDIC’) up to $250,000.

Customer Service

Few online lenders compare when it comes to customer service. OnDeck really stresses customer service and treating customers well (unlike many, many other online lenders). This is why 80% of customers return to OnDeck.  

Customers have a single representative for the lifetime of the loan, as opposed to being switched around between different people in a department. OnDeck representatives are also very active on Facebook and Twitter to resolve queries or answer questions.

Forbes ranked OnDeck as one of America’s most promising companies in 2014 and it has been featured in Crain’s New York Business Fast 50 in 2013, 2014, 2015, and 2016. Its customer service has played a huge part in its success, along with its transparent pricing model.

Best For…

OnDeck is perfect for businesses that want a substantial term loan but do not want to go through a stressful loan application process. It is best suited to established small businesses that are over 3 years old and with high annual revenue. OnDeck is not for high growth startups or for a small business that is just beginning.

Get a Business Loan With OnDeck Within 24h!

Additional Features

OnDeck is a simple provider that focuses on generating loans to reliable applicants. The main ‘feature’ is really their customer-centric system. However, additional features include:

  • Easy Access – customers can use phone, email, live chat, Facebook, or Twitter to get any issues resolved.
  • Smart Box – The Smart Box allows customers to see exactly how much they will be paying and lets them compare loans against one another without confusing terminology.
  • Loyalty BenefitsPeople who renew their loans with OnDeck get a loyalty bonus. All of the interest remaining on the current loan is waived and 80% of customers return to OnDeck for a second round of financing.

Positive Reviews

OnDeck is rated 4.9 out of 5 stars on TrustPilot, which is an impressive feat given its size. It has over 2,400 independent reviews on the site, 95% of which are ‘Excellent’.

The fact that two of the biggest customer review sites are saying the same thing, at scale,  indicates a high-quality lending platform. The reviews themselves are very similar. Other review sites also echo these sentiments. The most positive reviews on Trustpilot and Lending Tree are related to:

  • Customer Service – By far, the most common praise of OnDeck is for its superb customer service representatives and their willingness to respond to client issues promptly and professionally.
  • Upfront and Honest – OnDeck is not looking to simply hook more clients. They have transparent rates and do not ‘push’ to make a sale. All questions are answered by the representatives and displayed at the outset of the loan.
  • Easy Application Process – Most applications are processed quickly, responded to within 24 hours, and funded 24 hours thereafter. The few issues that do crop up are dealt with professionally by the OnDeck team.

Negative Reviews

There are astonishingly few negative reviews with OnDeck. Even now, with COVID-19 having an adverse effect on small businesses, the reviews are indicating that OnDeck is very flexible in terms of adjustments to enterprises under pressure. The only item to keep in mind is that the rates are steep and that the eligibility requirements are high.

OnDeck FAQ

How Does OnDeck Work?

Ondeck uses both automation software and personal interaction to facilitate loans. They are a direct lending platform, not a marketplace or loan facilitator. Applicants fill out the online form with basic information, get in touch with a representative, and typically get funded within a couple of business days.

What Kind of Payments Will I Have With OnDeck?

Payments are made either daily or weekly. This has implications for credit reporting but could work out to either your advantage or disadvantage. Just make sure you have enough capital to make these frequent payments.

Who is the Competitor of OnDeck?

All online lenders are competitors of OnDeck, to a greater or lesser degree. Kabbage and PayPal LoanBuilder are arguably the most direct competitors, but each lender has its own niche. OnDeck has higher minimum qualifications and deals with more creditworthy businesses that are more reliable in terms of repayments.

Where is OnDeck Based?

OnDeck operates in New York, where it has its main office. But it also operates in Canada and opened its doors to small businesses in Australia in 2016. Its Australian office is in Sydney.

How to Qualify for an OnDeck Loan?

You need to be in business for at least 3 years, have a minimum of 600 credit score, have no bankruptcies in the past 2 years, and have annual revenue of $250,000 or higher. If you don’t meet these requirements, then you simply won’t qualify.

How Long Does it Take to Get an OnDeck Loan Decision?

The loan decision typically takes less than a day after talking to the OnDeck representative. While it’s a little longer than a purely automated process, its still lightning fast in comparison to banks and other lending institutions.

What happens if I Stop Paying OnDcck?

The worse thing you can do from a business perspective is fail to make payments. First, your credit rating will start to drop, and rapidly. Then you will also have to make the initial payment on top of the late payment penalty, as interest accrues. You have to provide a personal guarantee for the loan, meaning that your personal property is at stake if you continually fail to make payments.

OnDeck Summary

OnDeck is the perfect lender in most respects. The only real disadvantages are that you need to have strong fundamentals to qualify and the rate is a little steep. Consider that the typical borrower will have $500,000 annual revenue, a 700 credit score, and about 5 years in business.

But for businesses that qualify, OnDeck is one of the most flexible, transparent, and customer-friendly lending platforms available. 

Get a Business Loan With OnDeck Within 24h!

Daniel Lewis
Daniel Lewis
Daniel Lewis is an MBA accredited investment professional who wants to assist small business owners to gain access to finance. After going through many channels for funding, Lewis has found that getting the first loan right is vitally important for future success.