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OnDeck small business loans review

Fast financing for startups and fair credit borrowers — but is it worth the high rates?

finder.com’s rating: 4.6/ 5.0

★★★★★

Bottom line: OnDeck offers a fast alternative to bank loans for businesses that have struggled to qualify for traditional financing. But the high interest rates combined with daily or weekly repayments can put a strain on your budget. Read our full review or get our 30-second take.

Details

Min. Amount$5,000
Max. Amount$250,000
Loan Term3 to 18 months
Min. Credit Score600
APRAs low as 35%
Requirements600+ personal credit score, 1 year in business, $100,000+ annual revenue

Pros

  • Same-day funding available on term loans and lines of credit
  • Builds your business credit history
  • Reduced or waived fees for repeat borrowers

Cons

  • High starting APR of 35%
  • Monthly maintenance fee of $20 on line of credit
  • Choice between prepayment penalty or higher rates

Our take on OnDeck

OnDeck is a direct online lender that offers short-term business loans and lines of credit. Along with companies like Kabbage, it relies on alternative data, such as shipping records, when underwriting your application. This means a low credit score or short time in business won’t count against you the same way it might at a bank.

But if you can qualify for a bank loan, OnDeck might not be the best choice for you. OnDeck has roughly tripled its starting APR during COVID-19 — making it an expensive choice even compared to the other short-term business lenders I’ve reviewed. The automatic weekly payments can be less flexible to businesses with uneven cash flow.

UPDATE: OnDeck offering regular business loans again

OnDeck has reopened its regular term loan and line of credit program after a hiatus in 2020 to focus on Paycheck Protection Program (PPP) funding. PPP loans are no longer available through the provider.

But it's not fully reopened. Businesses in states and industries that have been particularly impacted by COVID-19 still can't qualify for an OnDeck loan. There was no mention of which states are ineligible when I check on its website — the best way to find out if your business qualifies is to fill out a preapplication form.

OnDeck short-term loans are best for emergencies

OnDeck’s business term loans are designed to help you invest in a one-time expense to help grow your business. It’s a particularly good option for emergencies. With OnDeck’s short-term loan, the money can be deposited in your bank account as soon as you close your loan.

APRs start at a high 35%

OnDeck’s short-term loans come with rates starting at 35% APR. This includes an interest and an origination fee of 0% to 5%. Once you take out a term loan, you have between three and 12 months to pay it back in daily or weekly installments.

Rates and fees are based on your credit score, cash flow and payment history on products similar to OnDeck. If you go for OnDeck’s prepayment benefit, which waives prepayment penalties, OnDeck will also give you a higher rate than you might have otherwise qualified for.

Use our calculator to see how much an OnDeck term loan might cost you each month.

OnDeck loan calculator

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OnDeck lines of credit are best for instant funding

OnDeck’s line of credit gives your business access to financing as needed for ongoing expenses. Like OnDeck's term loans, these offer faster access to cash than your average credit line.

While I’ve found that credit lines typically take a few days to process a withdrawal, OnDeck can give you access to cash in a matter of minutes if you draw up to $10,000. Even on nights and weekends. This makes it a particularly good way to bridge gaps in cash flow — and avoid high-cost emergency financing.

High APRs include a monthly maintenance fee

OnDeck’s credit lines come with rates starting at 35.9%. While there are no origination or draw fees, that rate includes a monthly maintenance fee of $20. And OnDeck can reduce or waive that fee for repeat borrowers.

These credit lines are revolving, meaning that your credit limit is restored as you pay back each withdrawal. But unlike with some revolving lines of credit, each withdrawal turns into a short-term loan with a 12-month term with automatic weekly payments.

If you make multiple withdrawals before paying back the first, OnDeck consolidates all of your payments into one.

OnDeck increased rates in 2020

The starting rate on OnDeck’s loans are is significantly higher than the rates available before COVID-19. Previously, rates on term loans started at 11.89% APR and lines of credit began at 10.99% APR — higher than a bank, but average for an online lender. Its new starting rates of 35% and 35.9% APR are much higher than the starting rates available with most online lenders I’ve reviewed.

But the average rate didn’t jump nearly as much as the starting rate. Term loan borrowers qualified for an average APR of 49.06% during the last quarter of 2019 and 54.23% APR during the last quarter of 2020, according to the lender’s website. Average line of credit rates rose from from 35.2% APR at the end of 2019 to to 48.06% APR at the end of 2020.

This might not be as much of a surprise when you consider that OnDeck specializes in funding businesses that banks traditionally consider to be too risky to fund.

How OnDeck compares to Kabbage and Fundbox

Kabbage and FundBox are two online lenders that offer products to new and fair-credit business owners that are a lot like OnDeck. They and may be worth considering before you decide on a lender.

Kabbage is back at a limited capacity after pausing its regular lending program to focus on the PPP. Currently Kabbage lines of credit are only available to American Express customers, but will likely open to more small businesses later in 2021. Like OnDeck, its credit lines are made for fair credit and new businesses. You can qualify for this loan with a credit score as low as 600 and as little as one year in business. It also works similarly to OnDeck's credit line — each withdrawal turns into a short-term loan.

But, unlike OnDeck, it also offers a debit card that you can swipe to access the funds as needed. However, customers sometimes complain about its expensive, complicated fee structure and poor customer service.

Fundbox currently offers short-term loans and lines of credit with a slightly lower range of credit limits and funding available as soon as the next business day. You can qualify with as little as six months in business, but otherwise requirements are similar to what you'd find with OnDeck.

Like OnDeck, this product is expensive. Starting at 4.66% per week per week, Fundbox's financing fees increase depending on how long you take to repay. But you must use an eligible accounting software to qualify. And, like OnDeck, Fundbox financing also come with weekly repayments.

★★★★★


Finder Rating: 4.6 / 5

Find out more

Loan amount

$5,000 to $250,000

APR

Starting at 35%

Loan term

3 to 18 months

Requirements

600+ personal credit score, 1 year in business, $100,000+ annual revenue

★★★★★


Finder Rating: 4.15 / 5

Find out more

Loan amount

$500 to $250,000

APR

Varies

Loan term

6 to 12 months

Requirements

1+ years in business, $100,000+ annual revenue or $4,200+ monthly revenue over last 3 months

OnDeck reviews are mostly positive

BBB accredited Yes
BBB rating A+
BBB customer reviews 3.9 out of 5 stars, based on 138 customer reviews
BBB customer complaints 29 customer complaints
Trustpilot Score 4.9 out of 5 stars, based on 2,837 customer reviews
Customer reviews verified as of 03 June 2021
better business bureau accredited business

OnDeck reviews from customers are mostly positive. Most are happy with the relationships they developed with the OnDeck team. Several mention working with the same loan specialist for multiple loans. But a handful report that they didn't get sufficient relief after their business was affected by COVID-19. Others mention the high cost.

5 eligibility requirements

You’re eligible for an OnDeck business loan if you and your business meet the following criteria:

  • Personal credit score of 600 or higher
  • Business is at least 12 months old and based in the US
  • Annual revenue of at least $100,000
  • Eligible industry
  • Not located in Nevada, North Dakota or South Dakota

The average OnDeck customer has a business that’s been around for over three years and earns $300,000 annually. The majority of OnDeck customers also have a credit score of at least 650.

Ineligible industries

OnDeck doesn’t offer financing to the following industries:

  • Adult entertainment and distribution
  • Firearms vendors
  • Cannabis dispensaries
  • Nonprofits, public administration organizations or government agencies
  • Businesses involved in fortune telling and horoscopes
  • Religious organizations
  • Civic organizations
  • Car dealers
  • Used good dealers
  • Auction houses
  • Rooming and boarding houses
  • Money service businesses

How the application works

You can apply for a loan online or over the phone by calling 888-269-4246. If you apply online, the application only takes a few minutes to complete — and you only have to submit three months of bank statements. You can get your funds as soon as the next business day after approval. After your line of credit is set up, you can receive your funds within 30 minutes of requesting a draw.

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.

If you repay your term loan early, some businesses qualify for a prepayment discount. In this case, you won't have to pay all of the interest you would have otherwise paid if you stuck to the original term. But some businesses don't qualify, and if yours doesn't you're on the hook for 75% of the interest you would have paid.

A fast application and high APRs set OnDeck apart

OnDeck looks at your whole business’s profile — not just your business’s credit score — when considering your application. By using alternative data like your business’s success and cash flow, OnDeck opens up financing to business owners who’ve had trouble getting funding from a bank in the past.

It’s also quick, even compared to other online lenders I've reviewed. You can apply on your phone in just a few minutes with minimal paperwork. And where many lenders require at least a day to transfer a line of credit withdrawal, OnDeck only takes a few minutes.

But it's also uniquely expensive, even compared to other short-term online lenders. And it's one of the few to give you the choice between a prepayment penalty and higher rates — I personally think neither are great options. It may be worth prequalifying with OnDeck and a few of its competitors to see which can offer you the lowest rate.

OnDeck is a legit lender

Founded in 2006, OnDeck was one of the first lenders in the online business loan space. Since, it's funded $13 billion in small business loans across the globe — including businesses in Canada and Australia. In July 2020, OnDeck was acquired by Enova, a company that also owns the payday and installment loan providers CashNetUSA and NetCredit.

It's more transparent than your average online lender when it comes to rates, fees and terms. And like most online lenders it's not federally regulated and isn't required to meet the same requirements as a bank or credit union. This partly helps OnDeck fund more borrowers who can't qualify for bank funding. But if you want that extra layer of legitimacy, consider applying with a federally-insured institution.

See how OnDeck compares to more providers

OnDeck versus …

Gauge the financial health of your business before applying, and compare different business loan options to see if OnDeck is the right choice for you. If you like what OnDeck offers but still aren’t 100% sure, you can always browse lenders similar to OnDeck to make sure you’re making the right decision.

Business loan ratings

★★★★★ Excellent
★★★★★ Good
★★★★★ Average
★★★★★ Subpar
★★★★★ Poor

We rate business loan providers on a scale of 1 to 5 stars based on factors like transparency, costs and customer experience. We don’t take into account elements like eligibility criteria, state availability or payment frequency — we save that for our reviews.

Read the full methodology of how we rate business loan providers to get a better picture of what goes into each star rating.

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