Do you want to apply for OnDeck loan but you don’t know the requirements or rates? If YES, here is a complete guide on how to get OnDeck small business loans .
Sometimes in the life of a business, an entrepreneur may need quick loans to fund certain business emergencies. Banks and most lending institutions are never reliable to provide fast funding at short notice, so such businesses need to look to alternative lenders.
- How Does Small Business Loan Through OnDeck Work?
- How to Know your Business Needs an OnDeck Loan
- Criteria to Qualify for OnDeck Small Business Loans
What is OnDeck?
OnDeck is one of the few reliable alternative lenders in the market. Founded in 2007 by a group of investors, OnDeck has been supplying small business loans till date. They now have an A+ rating with the Better Business Bureau.
OnDeck is a direct lender that offers two options for unsecured business loans called Term Loan and Line of Credit. Line of Credit loans are for more established businesses, with APRs ranging from 13.99% – 39.99%. OnDeck’s Term loans are for newer businesses that want smaller loan amounts, and this type of loan does not have “interest rates” instead, OnDeck makes money on these loans by charging a fixed amount for every dollar borrowed. However, this can translate into the equivalent of quite a high APR.
OnDeck bases its loan decisions on cash flow and performance, rather than just on credit score, and it can deliver funds with the speed of a short-term loan without the expense. If you want to know more about OnDeck small business loans, I advise that you read on.
How Does Small Business Loan Through OnDeck Work?
Getting financing from OnDeck is really simple and straight forward. When you apply, your loan gets processed, and if you are approved, your loan would be issued in about 24 hours. If approved, your loan funds will be transferred to your selected bank account. Funding can be quick, and you can use your loan to build your business’s credit history by making timely payments.
OnDeck looks at cash flow and business success when determining a decision rather than just your credit score. You can choose between short- and long-term loans, ranging from $5,000 to $500,000. Loan terms run from 3 to 36 months, giving you a flexible payment period that suits your business.
- Industries Served
OnDeck serves over 700 different industries, including retailers, restaurants, auto repair shops, healthcare providers and more.
As with many small business loans, APRs vary greatly depending on the industry your business is in, your business credit, your personal credit, your revenue, and the length of time you’ve been in business. OnDeck term loans can have an AIR as low as a 9.99% while the starting APR for lines of credit is 13.99%.
- Origination Fee
You will have to pay a one-time origination fee that helps service and process the loan. The origination fee for the first loan is 2.5% to 4% of the loan amount, 1.25% to 3% for the second loan and 0% to 3% for the third loan.
- Loan Terms
You can repay your loan over a short period of time, or a bit longer depending on your qualifications and what you need. OnDeck separates its loan offerings based on term. For 6, 9, 12, and 18 month loans, rates are said to be as low as 10% for every dollar borrowed. It gives this example: if you borrow $21,000 on a 6 month loan term, for every $1 borrowed, you pay on average $0.18. The average cost of the loan is $3,789.
How to Know your Business Needs an OnDeck Loan
A couple of conditions predispose businesses to seek financing from OnDeck. If your needs fit into that criteria, then you should start thinking of getting a loan from OnDeck.
- If you need cash really fast: one of the advantages of OnDeck is that they provide finances to businesses really fast after the loan has been approved. So, an OnDeck loan would be good for you if you need an urgent loan. You can apply online or via phone in as little as 10 minutes and, if approved, get funding in as little as 24 hours.
- If you have a non-satisfactory personal credit score: OnDeck personal credit score minimum is 500 for term loans and 600 for lines of credit; the median credit score of OnDeck’s borrowers is 702. So with a 500 personal credit score, you can get a term loan.
- If you have big, unexpected expenses: The quick turnaround on financing means you can get cash in a pinch, and OnDeck can offer high financing depending on a few issues.
- If your business has uneven cash flow: OnDeck’s line of credit may help tide you over during periods of low cash flow.
Documents You Need to Apply for OnDeck Small Business Loan
OnDeck requires that you have at hand a few specified documents before you start your loan application process. You are expected to have;
- Your business financial statements including a Profit and Loss (P&L), an Income Statement, and an outline of your expenses
- Your personal financial information including the last three years of personal income tax returns
- Your business license
- A copy of your business lease
- Your business bank statements for the last three months
- Business tax ID
- Credit card statements for the previous three months
- Bank statements for the previous three months
- Social Security number for business owner or owners
- Driver’s license number and state of issue
- Proof that any past judgments or liens against your business have been satisfied
OnDeck Response Time
OnDeck is reputed for fast response during loan application. This is because they know that businesses they work with often need very urgent loans. When a loan application has been sent in, the borrower would typically get a response in an hour or under that. The loan application would be reviewed, and after the review and if the borrower qualifies, he or she would be issued the funding as fast as one business day.
How to Get OnDeck Small Business Loans – A Complete Guide
For an OnDeck small business loan, application is usually made online at any time of the day. The loan application is protected by encryption and Transport Layer Security (TLS) protocol to ensure your sensitive information is securely sent to OnDeck.
Steps to Apply Online to OnDeck
- To start, you need to go to the OnDeck website at www.ondeck.com and then click Apply Now.
- Fill in OnDeck’s four-page application with information on your loan, your business and your personal information. Carefully read and check off the application agreement and e-signature agreement before submitting your application.
- Wait for OnDeck’s automated underwriting software to process your information and do a soft pull on your credit score. You should find out if you’re approved for funding within minutes.
- An OnDeck loan specialist will call you to go over the details of your application and ask for additional documentation if needed.
- Asides from applying online, one can also apply by calling a loan specialist from 9:00 am EST to 8:00 pm EST at 888-269-4246.
- After receiving your funds, OnDeck will start taking daily or weekly “micropayments” out of your business’s bank account. They’re intended to have as little impact as possible on your cash flow, but you could end up in trouble if your bank account has low funds for a short period of time.
Criteria to Qualify for OnDeck Small Business Loans
OnDeck has its own loan qualification criteria, and you have to meet up each one of them for you to be given a loan.
- The first is your credit score. OnDeck’s minimum for term loans is 500 and 600 for its line of credit. OnDeck actually has its own “OnDeck Score,” which is a business credit scoring system it uses to analyze a large variety of data points in your application. You have to reach these credit averages for you to qualify.
- Again, you must have been running your business for at least one year, and you should have an annual revenue of $100,000 and above. OnDeck also requires that your business must be based in the united states and Canada as the company as of now does not give loans to businesses that are situated outside the country. This qualification also excludes the Quebec Provence.
- Asides been based in the US, your business should not have been bankrupt in the last two years. Any business that has declared bankruptcy or is recovering from bankruptcy is not allowed to apply. You also must not have any unresolved liens and judgments.
Benefits of OnDeck Small Business Loans
- Fast funding: You may be able to receive your loan as soon as the next business day.
- Dedicated specialists: US-based specialists are available to help with customer questions six days a week.
- Loyalty perks: Customers who return to the company for additional services may receive reduced fees. OnDeck’s term loans have a one-time origination fee between 2.5% to 4% of the total loan amount on your first loan. This fee drops to 1.25% to 3% on your second loan and to 0% to 3% on your third and future loans.
- Build business credit: OnDeck reports your payment activity to the business credit bureaus Equifax, Experian and PayNet. Making timely payments should build your business credit score, which could help you get a larger and less expensive small-business loan in the future.
Drawbacks of OnDeck Small Business Loan
i. It has Weekly or daily repayments: One of the major drawbacks of OnDeck loan is that it has shorter periods of time between repayments. OnDeck deducts a fixed daily or weekly payment from your business bank account. Term loans are repaid daily or weekly, while lines of credit are repaid weekly. Businesses with uneven cash flow should be aware of the frequent repayments.
This repayment method might not work for businesses that don’t have an even cash flow or who want to make a large purchase that could temporarily clear out their bank accounts for a few days or weeks.
ii. It is restricted to some industries: While many lenders have restrictions on which industries it does business with, OnDeck’s is extensive. Flea markets, funeral services, pawn shops, farms and more are just a few of the restricted industries. Be sure your business isn’t on this list before you apply.
iii. It does not have prepayment benefits on short-term loans: OnDeck doesn’t assess prepayment penalties, but repaying its term loans early won’t save you money because the lender requires customers pay a fixed amount of fees. This differs from small-business loans that require monthly payments of principal and interest based on an amortization schedule. Borrowers who repay amortizing loans early save on interest.
iv. It is not great for startups: Your business must be around for over a year and make at least $100,000 annually to qualify for an OnDeck loan.
v. Loans can be expensive: OnDeck’s outstanding term loans carry APRs from 16.7% to 99.4% in the first quarter of 2018. The rates for its lines of credit range from 11% to 60.8%. OnDeck’s weighted average APR was 48% for its term loans and 32.4% for lines of credit, according to the company’s most recent quarterly filing. Rates will change slightly each quarter.
These APRs include origination fees on its term loans and a $20 monthly maintenance fee for the lines of credit. The $20 fee is waived for the first six months if you draw $5,000 or more within the first five days of opening the credit line. There are no fees to draw money.
vi. Lien required in addition to a personal guarantee: Although OnDeck’s term loans aren’t backed by specific collateral, the company takes a blanket lien on all of a business’s assets. Like most lenders, OnDeck also requires borrowers to sign a personal guarantee, a written statement that says the lender can go after a borrower’s personal assets in the event of nonpayment of the loan. Failure to repay could damage your personal credit score too.