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.

Editor’s Note:OnDeck is one of the most highly regarded online loan providers. Customer service is flawless and all fees are clearly displayed using the SmartBox model. While the criteria are a little higher than other online loan outlets, this is the number one choice for those that can meet its eligibility criteria.

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

Good for… Bad for…
Businesses that have been in operation for longer than 3 years New Businesses and startups
Businesses with over $300,000 in annual revenue Businesses looking for alternatives to the Line of Credit and Term Loan
Businesses looking for a no-hassle loan, quickly
Businesses that want to have a qualified representative can talk to

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 the 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 financed 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 Type Term Loan Line of Credit
APR Average 49% 35%
Amount Range $5,000 – $500,000 $5,000 – $100,000
Term Length 3 – 36 Months 12 Months
Funding Time 24 Hours 24 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 Type Term Loan Line of Credit
Origination Fees 2.4% – 4.0% No
Prepayment Fees No No
Late Payment Fees Yes Yes
Maintenance Fees No $20
Interest Rate Range 12% – 99% 11% – 99%

Estimated APR

OnDeck offers term loan rates as low as 11.89% APR and Line of Credit rates as low as 10.99% APR. However, also on the OnDeck page is written:

“Eligibility for the lowest rates is very limited, available only to businesses with the strongest creditworthiness and cash flows, and typically businesses that have shown an excellent payment history on prior loan products with OnDeck. The weighted average rate for term loans is 49.06% APR; the weighted average for lines of credit is 35.2% APR. Weighted averages are based on loans originated in the quarter ending December 31, 2019.”

The APR is the all-inclusive figure that denotes total fees and what you will pay. But OnDeck charges a 0 – 4 % origination fee. The difference is that this is taken from your total rate, so a 2% origination fee would result in a 2% reduction in your total loan amount.

Without this origination fee, you would receive the full amount and pay the interest back over the lifetime of the loan. The APR is the same, but the way the amount is paid back is different. Try to understand this difference before you take out the loan, as it will assist you down the line. Some lenders can be tricky in how they represent the total loan repayment percentage (but not OnDeck).

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).

Criteria Term Loan Line of Credit
Minimum Credit Score 600 600
Minimum Annual Revenue $250,000 $250,000
Minimum Time in Business 36 Months 36 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.

What Happens After The Application?

What happens after application can often depend on what product you ‘ordered’ with OnDeck – the Line of Credit (‘LOC’) or the term loan. Unlike Kabbage and other fully automated lenders, OnDeck requires you to talk to a customer representative for a successful application. 

After you have submitted the necessary documentation and filled out the online form, OnDeck will conduct a soft credit check (this will not affect your credit score). You can get an offer on the same day that you apply. OnDeck uses the SMART model, which will neatly display your interest rate in a transparent manner.

Once you accept the terms and conditions, your loan begins. Funds can be in your account within 24 hours. Once the loan is repaid more than 50%, it is due for renewal/extension. With OnDeck, you have your own dedicated representative to answer any questions you might have.

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!

Not Suited For…

Ondeck is not suitable for businesses that are just starting out. The requirements are too high. OnDeck has raised its minimum eligibility criteria in recent years, ‘pricing’ many startups out of the market. New small businesses and startups are unlikely to have a credit score above 600 and an annual revenue above $300,000.

OnDeck is really suited to small to medium-sized businesses that already have a history and a good record. They want to see some history before taking you on. But once you are in, your business will be well taken care of. Ondeck has exceptional customer service.

Average Borrowers With OnDeck

According to the OnDeck FAQ page; the typical customer has:

  • Has been in business for 3+ years
  • Has a business annual revenue of $300,000+
  • Has a personal FICO score of 650+

This does not mean your application will not be successful if you do fail to meet the above, as they are averages. The minimum is $100,000 in annual revenue and a FICO score of 600.

Generally, OnDeck offers applicants a loan figure equal to 10% of the total annual revenue. So the more you earn, the more you can take out as a loan.

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 the 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 the 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.

How is OnDeck Helping Customers Amidst COVID- 19?

Like many online lending platforms, OnDeck has a tonne of pages and resources with regard to running a business during COVID 19. They have also completed surveys and done their own research.

But what have they done with regard to loan offerings and the servicing of existing debt? Every business will have jargon about how they are helping out during the crisis, but we need to investigate what they are doing under the hood.

On Trustpilot, OnDeck is still excellently rated (4.8 stars out of over 2,500 reviews) with many recent positive statements, especially in terms of customer service. While many businesses are having a hard time with COVID, OnDeck is still doing a fantastic job.

This does not mean they are forgiving debt arbitrarily. Many customers are expecting that they should have their loans are forgiven, which is not actually mandatory. The purpose of the existing financial programs (such as the Paycheck Protection Program) exists so that businesses can actually make payments on existing debt. This is what keeps the economy running.

OnDeck used to provide the Paycheck Protection Program (‘PPP’ ) when it was available. Through this SBA mandated program, you get a 24 week forgiveness period, but the loan has to be used for payroll costs, rent, covered utilities, and interest on a mortgage. The deadline for application was August 8th, 2020. The option was there to apply for both a typical online loan and an SBA PPP loan through OnDeck.

All in all, OnDeck has done a good job to help out businesses during the COVID 19 situation, and the online reviews reflect this quite accurately.

Why OnDeck Beats Banks

With OnDeck, you can either call a representative or just apply online. You have a lot of flexibility in terms of how you can access the service – no need for an actual visit to the branch, though OnDeck is not purely an automated service.

It also beats banks based on the minimum qualification criteria. Imagine getting all the documentation for an SBA(7)(a) and waiting 30 days for an application that is denied! With Kabbage, all you need is $50,000 in annual revenue to get started, 12 months in business, and some recent financial statements.

You will know where you stand immediately with this particular lender. The difference with OnDeck is that you get an advisor. Now, many services indicate that you get your own personalized adviser. But this is usually just a token gesture. With OnDeck, you get a person you can actually speak to. 

It also beats banks based on the minimum qualification criteria. Imagine getting all the documentation for an SBA(7)(a) and waiting 30 days for an application that is denied! With Kabbage, all you need is $50,000 in annual revenue to get started, 12 months in business, and some recent financial statements. 

You will know where you stand immediately with this particular lender. The difference with OnDeck is that you get an advisor. Now, many services indicate that you get your own personalized adviser. But this is usually just a token gesture. With OnDeck, you get a person you can actually speak to. 

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 fails 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.