OnDeck Small Business Loan Review: Rewards for Repeat Borrowers and Fast Funding

OnDeck is a great choice for small business owners who want a lender that provides discounts for continued service. This means for every new loan or line of credit you borrow, OnDeck will provide further discounts on its origination fees. But when compared to other online lenders, OnDeck falls short in many other areas due to higher fees and stricter requirements.

Business Loans and Lines of Credit Features

OnDeck offers small business financing in the form of term loans and lines of credit.

OnDeck Business Loan Features

OnDeck has both short-term and long-term loans. Short-term loans have maturities of one year or less, and long-term loans have maturities from 3 - 36 months. On short-term loans, rates are quoted as a total interest percentage, which is the same as fixed simple interest. For instance, a short-term $10,000 loan with a 10% simple interest rate means you would pay $1,000 in interest, for a total payback of $11,000. Long-term loan rates are quoted as an annual interest rate, which is similar to an APR but does not include all associated fees. However, we converted the rate into a standardized cost per dollar that does encompass all associated fees and helps make comparisons easier.

OnDeck's term loans are most recommended for large single purchases. In other words, if you need a larger lump sum and you know for a fact that you'll be spending every single dollar borrowed, term loans are the way to go, as they make large purchases easier to digest by spreading them over multiple periods.

Loan amount range$5,000 - $500,000
Cost per dollar borrowed range$1.10 - $2.00
Loan terms3 - 36 months
Repayment optionsDaily or weekly

OnDeck Business Line of Credit Features

OnDeck offers a flexible line of credit with terms of 6 months and a loan range of $6,000 - $100,000.

We'd recommend OnDeck's business line of credit for recurring expenses like payroll or ongoing operations. Similar to a credit card, once you pay off the balance on your line of credit, that amount is then replenished and readily available to be used again. The only caution we'd give is whenever you use your line of credit, make sure the return on investment will be greater than your borrowing costs.

Line amount range$6,000 - $100,000
Cost per dollar borrowed range$1.14 - $1.40
Line of credit terms6 months
Repayment optionsWeekly

OnDeck Review: Who Should Apply

Compared to other online lenders, OnDeck may not be the most impressive lender out there, but we would still recommend applying. OnDeck only performs soft credit score pulls (in the U.S.) when an application is filled out, and it's worth it to see what rates OnDeck could offer. Given that OnDeck provides a decision within a single business day, there is little to lose in applying when shopping around, and we highly recommend shopping around for the best rates. OnDeck's term loans can be comparatively larger than other online lenders' loans, which makes them a valuable lender for borrowers who can't obtain loans from traditional lenders but are still looking for large loans. However, potential borrowers should be aware that OnDeck is among the most expensive lenders, in terms of interest rates and fees.

What We Like About OnDeck

Term loan amounts. Compared to other online lenders, OnDeck stands out with its options for term loan amounts. This makes OnDeck very valuable for small businesses that can't quite qualify for large loans with traditional lenders but still need large sums of working capital.

Funding speed. Like other online lenders, OnDeck has an extremely short funding cycle. Within minutes of submitting your application, you'll receive a decision. Following that, you should receive funding within 48 hours, which is one of the shortest end-to-end waiting periods even among online lenders.

Repeat customer discounts. OnDeck is one of the only online lenders that explicitly advertises discounts for repeat customers. Other online lenders have been known to offer such discounts from time to time, but OnDeck is rare in that it standardizes these discounts to customers in good standing.

What We Don't Like About OnDeck

As stated before, OnDeck doesn't necessarily stand out too highly among other online lenders. Although OnDeck is one of the first online lenders to come onto the market, it has fallen behind with how competitive its offerings are.

High costs. As mentioned before, average rates are high even when compared to other online lenders. According to the company's most recent quarterly filing, the average cost per dollar borrowed was $1.32 for a line of credit and $1.43 for a business loan in quarter two of 2017. Banks tend to have strict credit and revenue requirements, but this means that banks have very competitive interest rates if you can qualify. If you can qualify for financing from a commercial bank, that would be your cheapest option.

Prepayment penalty. OnDeck's business loans come with flat interest fees. This means no matter when you pay that interest off, you'll still need to pay the full fee. However, OnDeck does offer a 25% prepayment "discount" if you do manage to pay off your loan within a certain amount of time. But be wary here. While OnDeck does call this a discount, we would actually still call this a penalty.

For example, if you were to take out a loan with OnDeck and pay it off the next day, you'd still need to pay 75% of your original interest amount. Compare that with other lenders, like StreetShares, which doesn't charge any prepayment penalties. In the same scenario, your interest payment would be entirely voided.

Industry restrictions. Finally, OnDeck does not lend to businesses in certain industries.

  • Adult entertainment / Materials
  • Drug dispensaries
  • Firearms vendors
  • Government and nonprofits, public administration
  • Horoscope / Fortune telling
  • Lotteries / Casinos / Raffles / Gaming / Gambling
  • Money services business (MSB)
  • Religious, civic organizations
  • Rooming and boarding houses

Eligibility Criteria

To qualify for an OnDeck business loan or line of credit, you and your small business must meet the following criteria.

Minimum requirementsAverage borrower profile
Age of business12 months7 years
Annual revenue$100,000$450,000
Credit score500660

In addition to these requirements, OnDeck does require borrowers personally guarantee the loan, and OnDeck will file a blanket lien against the business, but there are no specific collateral requirements.

How Does OnDeck Compare to Other Online Lenders?

As mentioned before, OnDeck is more expensive compared to other online lenders. Let's take a look at the competition.

KabbageFunding CircleLendingClub
Requirements
  • One year in business
  • $50,000 in annual revenue
  • No minimum credit score
  • Two years in business
  • $150,000 in annual revenue
  • Credit score above 620
  • One year in business
  • $50,000 in annual revenue
  • Credit score above 620
  • Must own at least 20% of business
Cost per dollar borrowed range$1.14 - $1.40 Line of credit$1.08 - $1.33 Term loan$1.08 - $1.36 Term loan
Loan amount$6,000 - $100,000 Line of credit
$25,000 - $500,000 Term loan$5,000 - $300,000 Term loan
Prepayment penaltiesRemaining fees waivedRemaining fees waivedRemaining fees waived
Funding wait timeAs fast as 24 hours Line of credit10 business daysTerm loan7+ business days Term loan

OnDeck vs Kabbage

We recommend borrowers choose Kabbage over OnDeck if they cannot qualify with OnDeck, prefer monthly repayments or want a line of credit between $2,000 - $150,000. Kabbage only offers lines of credits with short repayment cycles of 6 or 12 months. Unfortunately, because both lenders are relatively lenient, their costs per dollar reflect the increased risk they're taking through their high rates. Both Kabbage and OnDeck are some of the most expensive online lenders. The plus side is that OnDeck reports its average rates, while Kabbage does not. Both lenders also fall short when it comes to prepayments. OnDeck doesn't waive all remaining fees when you repay your loans early, and Kabbage front-loads all of its fees early on in the terms, so the incentive to pay off loans early is minimal.

OnDeck vs Funding Circle

Funding Circle is better for borrowers who want monthly repayment cycles, longer loan terms or lower rates—provided they can afford to wait longer for funding. Funding Circle certainly has stricter requirements, but if borrowers can qualify, the lower fees are well worth it. Qualifying is strict, as Funding Circle is one of the only online lenders to require applicants show profitability for the past two years and be registered as an LLC or incorporated. However, Funding Circle's costs per dollar of $1.08 - $1.33 certainly reflect the reduced risk that comes with stricter requirements. If funding speed is a concern, we recommend borrowing from OnDeck instead, as Funding Circle can take up to 10 business days. Also, if borrowers are interested in a line of credit instead, OnDeck is the winner because Funding Circle only offers term loans.

OnDeck vs LendingClub

Similar to Funding Circle, LendingClub trumps OnDeck with more flexible loan terms, monthly repayment schedules and lower rates. LendingClub has stricter application requirements, but borrowers who qualify will benefit from its more appealing terms. Another drawback of LendingClub is that they only offer term loans. OnDeck appeals to slightly less qualified businesses than LendingClub, but borrowers are paying a premium for the incurred risk with its higher rates.