OnDeck Review: Business Term Loans and Lines of Credit

OnDeck Review: Business Term Loans and Lines of Credit

OnDeck Review: Business Term Loans and Lines of Credit

Advertiser & Editorial Disclosure

OnDeck is an online lender offering small business term loan of $5,000 - $250,000 and lines of credit of $6,000 - $100,000. They lend to businesses in all 50 states across a number of different industries, including restaurants, retailers, healthcare professionals, contractors, and more.

Over the years, OnDeck’s loan products continue to improve for business owners. At the time of publication, the line of credit annual percentage rating is As low as 29.9% APR*, and the term loan As low as 29.9% APR.*

There are several small business loans with similar average APR like Lending Club, Funding Circle, and Dealstruck, but OnDeck offers a quick turnaround time (As fast as 1 day) that many other lenders cannot offer.

What an OnDeck loan might look like

OnDeck lends to businesses with at least one year in business and $100,000 in annual revenue. Let’s say your business qualified for a $50,000 loan from OnDeck with fixed, daily payments spread out over 12 months and a total payback amount of $59,500. If you were making daily payments, that would mean 252 fixed payments. With a 2.5% origination fee, that means you would pay $1,250 up front for the loan.

The total cost on this loan would be $9,500 + $1,250 = $10,750. The fixed daily payment would amount to $236.11 and, using Nav’s OnDeck APR calculator, we can see that the APR would be about 42.60%. (Try calculating your rate below!)

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The pros: Why should I consider OnDeck?

Fast funding with an easy application process. Businesses can be approved for a loan or line of credit in minutes and receive funding within 24 hours. The application itself takes a matter of minutes, where you’ll be asked basic information about your business, the business owner(s), and the business’s financial needs. Documentation required includes three months of business bank and credit card statements, your business Tax ID number, and the owner’s social security and driver’s license numbers.

OnDeck helps borrowers build business credit. OnDeck reports to your payment activity to business credit reporting agencies, including Experian, PayNet and Equifax. For businesses, making on time payments on an OnDeck loan or line of credit can significantly increase business credit scores, making it much easier to secure lower cost funding and trade terms in the future.

Good for borrowers with poor credit. Many of the lower cost business loan options out there require a credit score of 620 or higher. OnDeck considers borrowers with personal credit scores as low as 500, and OnDeck puts more emphasis on evaluating a business’s cash flow than its owner’s credit scores.

The cons: Why should I consider other options too?

The price tag. Stacked up next to other loan products, OnDeck’s loans are on the expensive side. Other players in the space, like Lending Club and Funding Circle, offer loans with rates no higher than 33% APR. An SBA loan will usually be in the 6 – 13% APR range. The catch with lower cost lenders is that they have more strict business and credit requirements, and will often have a longer turnaround time for funds.

OnDeck’s line of credit product offers competitive rates when compared to other line of credit providers. Note that whether you are looking at the line of credit or loan product, you should  shop around for the best financing for your business.

Lack of flexibility to pay back the loan early. OnDeck does not charge a prepayment penalty, but they don’t offer much of a discount to borrowers who would like to pay back their loan early. As we noted last year when we decoded a loan offer from OnDeck, they may offer a small discount, but the process for receiving a discount for paying back early is not transparent.

The Final Verdict

 Term Loan by OnDeckLine of Credit by OnDeck
Amount$5,000 - $250,000 $6,000 - $100,000
RatesAs low as 29.9% APR

Origination fee: 2%-4% of loan amount (can be lower for businesses taking out a 2nd or more loan)

As low as 29.9% APR

 Fee: $20 monthly maintenance fee

Repayment scheduleDaily, weekly up to 24 months12, 18 and 24 month repayment term, resets after each withdrawal - Weekly & Monthly Payments
Speed of funding48 hoursAs fast as 1 day
Loan durationVaries by state (potentially up to 24 months) 6 months
Credit score needed to qualify500+600+
RequirementsApplication: All digital. May require some phone communication
1. 12 months in business
2. $100,000 in revenue for the past year
3. Business does not fall under the restricted industries list
Application: All digital. May require some phone communication
1. 12 months in business
2. $100,000 in revenue for the past year
3. Business does not fall under the restricted industries list
Collateral Required1. Personal guarantee required
2. Lien on business assets required

OnDeck’s term loan can be a good option for:

  1. Businesses who need a cash infusion quickly to take advantage of a great deal on inventory.
  2. Businesses who have a lucrative growth opportunity and need more cash to take advantage of it.
  3. Businesses who have an expansion opportunity with a quick, high return, and need more cash to take advantage of it.
  4. Business owners who have bad personal credit.

OnDeck’s line of credit would be a good option for businesses who need an emergency fund for when unexpected expenses pop up, or for businesses who need a fund to occasionally help smooth out cash flow.

As with any funding option you are considering, be sure to evaluate other options available to you. The best way to do so is through Nav, which uses your business data to show you financing options tailored to your business, allows you to compare options side-by-side, and filter by what’s important to you.

*Based on loans originated in the half-year ending March 31, 2022

This article was originally written on April 28, 2016 and updated on September 9, 2022.

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