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OnDeck Capital Review: Pros, Cons & How To Apply

OnDeck is widely viewed as one of the most reputable and established online business loan lenders. This is mainly because OnDeck’s business model and products have multiple features that set them apart from the rest of the industry. By incorporating elements of traditional and non-traditional lenders, OnDeck can solve a massive range of cash flow issues.

But to determine if OnDeck is the right option for your needs, you must first understand what kind of businesses OnDeck’s products are geared towards.

In this guide, we’ll answer the following questions and more:

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    What Is OnDeck?

    OnDeck is an online business lender with two products: business term loans and business lines of credit.

    For the former product, you can borrow up to $500,000 with terms of up to 36 months. For the latter, you can borrow up to $100,000 with terms of up to 12 months.

    What Do You Need to Apply for OnDeck?

    To apply for both products, you will need the following documents and information:

    • Three months of business bank statements
    • Voided business check
    • Copy of your driver’s license
    • Business tax ID number
    • Business owner’s social security number
    • Estimated annual gross revenue
    • Average bank account balance

    Other Important Factors for OnDeck:

    For both products, eligible businesses must have a personal credit score of 600, at least 36 months in business, and at least $250,000 in annual revenue. OnDeck does not have a minimum business credit score, but they will check your score when applying.

    You must also make at least five deposits in your business bank account each month. If you’ve ever filed for personal bankruptcy, OnDeck will only work with you if the bankruptcy was discharged at least two years ago. OnDeck does not work with businesses with $20,000 plus in total liens and judgments against their business, or more than 5.5% of their annual revenue.

    Eligible businesses cannot use their loans to purchase a business and cannot operate out of a home address.

    The individual who fills out the application must sign a personal guarantee. This means that if you default, OnDeck could potentially seize your personal assets to make up for the loss.

    OnDeck does not report to the personal credit bureaus, but they report to the business credit bureaus. This means that your payment history will only affect your business credit score.

    You can use your loan to refinance existing debt, but only if you borrow 200% of the existing debt. Once you receive your funds, OnDeck will file a UCC-1 blanket lien on your business. This means that in addition to your personal assets, OnDeck could potentially seize your business assets to make up for the loss.

    For OnDeck, You Need to Know That:

    Interest rates for both products can range from 12% to 99%. However, the average APR for a business term loan is 49%, compared to 35% for a business line of credit.

    For a business term loan, you can choose to make daily or weekly payments. For a business line of credit, fixed weekly payments are the only option. Every time you draw from your credit line, you must pay back the amount within six months, plus interest. There is no fee for drawing funds from your credit line.

    If this is your first business term loan with OnDeck, you’ll be charged a 2.4% to 4% origination fee. Your origination fee for your second loan will be 1% to 3%. For your third, the fee drops to 0% from 3%.

    Business lines of credit carry a monthly maintenance fee of $20. If you draw $5,000 or more within five days of receiving funds, this fee will be waived for six months.

    If you miss a payment, you will incur a late payment penalty.

    There are no prepayment penalties. But for business term loans, you won’t save any money by paying early since all clients pay a fixed fee.

    How To Apply With OnDeck:

    The application for OnDeck’s business term loan and business line of credit can be completed in less than ten minutes. Afterward, funds should appear in your bank account as soon as the next business day.

    Here’s how to get started:

    Step 1: Fill Out Application

    You can apply for both OnDeck products through United Capital Source. Before applying, a UCS executive will work with you to make sure OnDeck is indeed the right company for your needs.

    Our one-page application requires basic information about you and your business. You’ll also submit your credit score, annual revenue, and last three months of bank statements. Once you provide the required documents and information, OnDeck will perform a soft credit pull. This will not affect your credit score.

    Step 2: Speak to a Representative

    Unlike other online business lenders, OnDeck’s underwriting process is only partially automated. Thus, when you submit the previous information, you’ll have to speak to a representative before moving forward. You should hear from an OnDeck representative within a day or two after applying.

    UCS will help negotiate rates and terms to ensure you receive the most beneficial arrangement for your business.

    Step 3: Review Your Offer

    After speaking to a representative, you should receive an offer within one business day. The proposal will come in the form of a SMART Box disclosure form. This comparison tool clearly explains everything you need to know about your loan, like the total cost, individual payment amount, fees, etc.

    Your offer will most likely amount to approximately 10% of your annual revenue. If you accept the offer, funds will appear in your bank account as soon as the next business day.

    OnDeck: Post Funding

    For business term loans, your first payment is due the next business day after you receive funding. Payments will automatically be deducted from your business bank account, either on a daily or weekly basis.

    Your first payment is due the next day after you draw from your credit line for a business line of credit. From then on, fixed weekly payments will automatically be deducted from your business bank account.

    You can renew both products after you’ve paid back 50% of your outstanding balance. If you renew your business term loan or line of credit, OnDeck will waive all interest on the existing loan. For business term loans, your next origination fee is likely to be on the lower side. If you renew a third business term loan, you will most likely have no origination fee at all.

    What Are the Advantages of OnDeck?

    OnDeck holds several advantages over the majority of the online business lending industry. First off, OnDeck has been funding small businesses since 2006. This makes them one of the oldest and most experienced online business lenders. OnDeck’s growth and experience show that they have the resources to provide excellent service and have earned a trustworthy reputation within the small business world.

    Speaking of customer service, OnDeck sets the bar pretty high when it comes to transparency.

    Thanks to the aforementioned SMART Box model, new borrowers have every piece of information they need before accepting an offer. And it’s not as if you’re relying on a mysterious computer algorithm to determine your rates, terms, and borrowing amount. Your representative will carefully explain how your loan is developed and walk you through the entire repayment process. Unfortunately, many other online business lenders will not disclose this information unless you ask.

    Another significant advantage is cheaper origination fees for returning clients. This gives clients less incentive to go through the trouble of looking for another lending partner down the line.

    Lastly, OnDeck offers larger borrowing amounts than most other online business lenders. Many of their competitors don’t offer more than $250,000. Higher borrowing power can come in handy when you aren’t 100% sure about your investment’s true cost and might need more cash than anticipated.

    What Are the Disadvantages of OnDeck?

    Compared to most other online business lenders, OnDeck’s requirements are pretty stringent. Many OnDeck competitors work with businesses that don’t earn $250,000 a year and are less than one year old.

    As an online business lender, OnDeck’s high interest rates shouldn’t come as a surprise. But not every online business lender allows only weekly or daily payments for business term loans. These payment frequencies could put significant pressure on your cash flow.

    Odds are, if you can qualify for OnDeck’s lowest rates and highest borrowing amount, you can probably be eligible for a much cheaper product from another institution.

    Though OnDeck doesn’t charge prepayment penalties, there’s no incentive to pay early for business term loans because all clients pay a fixed amount of fees. To save money by paying early, your loan must usually have an amortization schedule.

    Apply for business funding through United Capital Source today.

    OnDeck Capital FAQs

    How Do I Choose Between Kabbage vs. OnDeck?

    OnDeck and Kabbage are two of the most popular and well-reviewed online business lenders. Before getting into differences between products, it’s important to note that Kabbage has much looser requirements. There’s no minimum credit score, and you only need $50,000 in annual revenue.

    While OnDeck offers business term loans and lines of credit, Kabbage only offers lines of credit. Kabbage’s product carries a credit limit of $250,000, compared to $100,000 for OnDeck’s line of credit. Also, Kabbage offers monthly payments, whereas OnDeck requires weekly or daily payments. However, Kabbage front-loads interest for six-month and twelve-month terms, so your first few monthly payments will be considerably larger than your remaining payments.

    As you can see, both options could be detrimental to your cash flow. Thus, it would be best if you determined whether your cash flow will be more affected by Kabbage’s front-loaded interest or OnDeck’s payment frequencies.

    What Are OnDeck Interest Rates?

    Interest rates for OnDeck depend on typical factors like credit score, revenue, cash flow, etc. You’ll have to enter this information into OnDeck’s website to see what your interest rate will be. But for both products, the lowest possible annual interest rate is around 11%-12%, and the highest is 99%. If you can barely meet OnDeck’s requirements, your line of credit or business term loan could be costly.

    Does OnDeck Report to Credit Bureaus?

    OnDeck does not report payments to personal credit bureaus, but it reports to three business credit bureaus: Equifax, Experian, and PayNet. So, while your payments won’t impact your personal credit score, they will impact your business credit score. Business credit plays an even more significant role for some business lenders than personal credit for application decisions.

    How Does OnDeck Work?

    OnDeck uses a mix of automation and manual oversight to determine borrowing amounts and interest rates. You’ll enter information about your business before speaking to a representative, who will ensure that there are no surprises during repayment. The entire application and funding process usually takes 1-2 business days. Once you’re approved, weekly or daily payments will be automatically deducted from your account.

    What If I’m Declined By OnDeck?

    If OnDeck declines your application, it might be because your cash flow cannot handle the combination of interest and weekly or daily payments. Thanks to OnDeck’s excellent customer service, you can contact the company to find out exactly why you weren’t approved. If cash flow turns out to be the culprit, you may still have several options for business term loans or lines of credit.

    Other business lenders are more flexible with their repayment structures and have more than two products to suit different cash flow cycles. For example, you wouldn’t necessarily have to make daily or weekly payments solely because you have poor credit or less time in business. Other available business loan programs include bad credit business loansaccounts receivable loansequipment financing, and merchant cash advances.

    In summary, it’s important to remember that OnDeck has some of the most stringent requirements in the online business lending space. Hence, failing to qualify for their products doesn’t mean you’ll see the same outcome with one of their competitors.

    Making Your Decision

    OnDeck is the go-to online business lender for more established businesses. They cater to businesses that want the speed of non-traditional lending with the borrowing amounts and customer service of traditional lending. If you don’t belong to this group, you might seek other small business loan options with similar products. And there’s a lot to choose from.

    On the other hand, if you can qualify for OnDeck, you might not find a more reputable and trusted online business lender in today’s market. For this reason, we at UCS give Ondeck Capital a 4.8 out of 5 rating and highly suggest working with them if you qualify.

    Apply for business funding through United Capital Source today.

    Why Choose United Capital Source?

    Why businesses choose UCS:

    Quick funding options that won’t affect credit
    Access to 75+ lenders with multiple products to choose from
    Financing up to $5 million in as few as 3 days
    1500+ 5 star reviews from happy clients!

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