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Reviews, Small Business

OnDeck Small Business Loan Review

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

OnDeck business loans
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OnDeck is an online lender that has been providing funding to small businesses since 2007 but has recently rolled out partnerships with brick-and-mortar banks, combining OnDeck’s technology with the banks’ deep balance sheets and credit expertise. OnDeck offers term loans and lines of credit to business owners looking to grow their operations. Approval for financing is based on overall business performance, not just credit score. OnDeck has issued more than $8 billion in loans to 80,000 small businesses in more than 700 industries throughout the U.S. OnDeck is based in New York and has been a public company since 2014.

OnDeck small business loan details

Term loans: OnDeck offers up to $500,000 in both short-term and long-term loans.

Short-term loans span three to 12 months and could come with a simple interest rate as low as 9%. OnDeck calculates simple interest as the total amount of interest you would pay as a percentage of your total loan amount. The weighted average rate as of June 30, 2018 was 25.3% simple interest.

Long-term loans have 15- to 36-month terms and could come with an annual interest rate as low as 9.99%. OnDeck determines AIR as the yearly interest percentage you would pay based on your average loan balance, minus fees. To pay back your loan, you would make fixed daily or weekly payments that OnDeck would automatically deduct from your business bank account. The weighted average AIR as of June 30, 2018 was 48.7%.

No matter if you choose a short-term or long-term loan, it’s a good idea to consider the annual percentage rate as well since APR includes the cost of interest plus fees. In 2017, On Deck’s term loan APRs ranged as high as 99.7% with an average APR of 45.2%, according to the company’s annual report.

 Loan amountLoan termAPR rangeFeesTime to funding
Short-term loan$5,000 up to $500,0003 to 12 monthsVaries, with an average rate of 45.2%Origination fee of 2.50% - 4.00%, lower for subsequent loansAs soon as 24 hours
Long-term loan$5,000 up to $500,00015 to 36 monthsVaries, with an average rate of 45.2%Origination fee of 2.50% - 4.00%, lower for subsequent loansAs soon as 24 hours

Lines of credit: Businesses could qualify for a line of credit up to $100,000 with an APR as low as 13.99% though, like term loans, your APR could be higher. The weighted average APR was 32.6% as of June 30, 2018. The credit line amount and your interest rate would be based on your business and personal credit, as well as an assessment of your business as a whole. OnDeck would automatically deduct fixed weekly payments from your business bank account as you pay back the debt.

 Loan amountTermsAPR rangeFeesTime to funding
Line of credit$6,000 to $100,000Fixed weekly payments As low as 13.99% with an average APR of 32.3% $20 monthly maintenance fee, waived if you withdraw $5,000 or more in the first 5 days.As soon as 24 hours

What businesses are eligible for an OnDeck loan?

OnDeck’s minimum qualifications are not as strict as banks’ requirements. OnDeck asks for at least one year in business and at least $100,000 in annual revenue. Business owners must also have a personal credit score of 500 or higher.

In 2017, borrowers had a median annual revenue of about $631,000 with 90% of customers having between $162,106 and $3.8 million in annual revenue.

There are several industries OnDeck does not work with, including the following:

  • Adult entertainment/materials
  • Drug dispensaries
  • Firearms vendors
  • Government and nonprofits
  • Public administration
  • Horoscope or fortune telling
  • Lotteries, casinos, raffles, gaming and gambling
  • Money services businesses
  • Religious or civic organizations
  • Rooming and boarding houses

OnDeck has the ability to change the list of restricted businesses at any time. Additionally, all businesses are individually subject to OnDeck’s approval, regardless of industry.

OnDeck

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The pros and cons of an OnDeck small business loan

Pros

  • Credit score isn’t the deciding factor. OnDeck considers your business’s cash flow in addition to your credit score when reviewing your loan application. You wouldn’t be automatically turned down if you have poor credit.
  • Simple application. You may be able to complete OnDeck’s online application in minutes and you could be approved for financing in as little as 24 hours. OnDeck loan specialists are also available if you need assistance.
  • Potential to improve your business credit score. OnDeck reports your term loan payment information to three business credit bureaus, Experian, Equifax and Paynet, each month and reports line of credit information to Experian. Making payments on time and maintaining good credit history with OnDeck would improve your overall business credit profile.

Cons

  • Lowest interest rates are uncommon. The lowest advertised interest rates are usually reserved for borrowers with the strongest creditworthiness and cash flow and those that have previous payment history with OnDeck. The average rate for term loans is 25.3% simple interest and 48.7% AIR.
  • A personal guarantee is required. OnDeck places a general lien on the assets of your business and requires a personal guarantee to secure a loan. Signing a personal guarantee puts you on the hook to pay the debt even if your business defaults.

Application process and requirements

You can apply for an OnDeck loan online or by phone and the process could take a little as 10 minutes. There’s no obligation to accept a loan offer, which is valid for 30 days after you’re approved.

In addition to basic information about your business, OnDeck may ask you to submit the following documents with your application:

  • Business tax ID
  • Bank statements from the past 1-3 months
  • Your Social Security number
  • Your driver’s license and state of issue

If you’re approved, you could receive funding in your business bank account as soon as the next day. OnDeck disperses loans through the Automated Clearing House network or a wire transfer. Customers with a line of credit would receive a debit card connected to the business bank account that OnDeck has on file.

Small business owners could also take advantage of OnDeck’s technology through their existing banks. Chase’s Business Quick Capital allows certain clients to apply for a business loan online and receive funding as soon as the same day. PNC Bank is set to roll out a similar program in 2019 for customers to apply online for loans up to $100,000.

The fine print

Fees. OnDeck charges an origination fee on your first loan that ranges from 2.50% - 4.00%. Each subsequent loan that you get from OnDeck would have a lower origination fee. If you take out a line of credit, you would owe a $20 monthly maintenance fee. That fee can be waived if you withdraw more than $5,000 within one week of opening your line of credit.

No collateral. Although OnDeck puts a general lien on your business assets when you borrow money, you wouldn’t have to offer a specific business asset as collateral. That means you wouldn’t be denied funding solely because you don’t have valuable business assets to use as collateral. Without having to appraise and value particular assets, OnDeck can award funding faster than a traditional bank.

Fixed payments. To collect payments, OnDeck deducts a fixed amount from borrower’s business bank accounts on a daily or weekly basis, depending on the type of loan. These payments could impact your cash flow, but they should be easy to manage because they are predictable and unchanging.

Other alternative small business lenders

LendingClub

Online lender LendingClub offers business loans up to $300,000 and terms of one to five years. Like OnDeck, LendingClub collects fixed monthly payments as you pay back your loan. There are no prepayment penalties and your interest rate could be as low as 5.99%. To qualify for a LendingClub business loan, you would need at least one year in business, at least $50,000 in annual sales and no recent bankruptcies or tax liens. You would also need to own at least 20% of the business and have fair credit or better.

LendingClub

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Kabbage

Kabbage is an online lender that provides both secured and unsecured loans to small business owners. Kabbage offers term loans, lines of credit and working capital loans, among other financing options. Six-month and 12-month term loans are available, and interest rates range from 8.00% to 24.00%. You could be approved for up to $250,000.

Kabbage

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The bottom line

Business owners applying for financing from OnDeck have a chance to secure funding without relying on their credit score or collateral. Compared with a traditional bank, OnDeck’s application process is simple and time to funding is fast. However, your interest rate could be higher than what OnDeck advertises if your credit isn’t in great shape. OnDeck collects fixed payments, which could cut into your daily cash flow. If you’re approved for a loan, make sure it has an interest rate and terms that your business could handle. If you feel comfortable with the offering, an OnDeck loan could be a quick solution to meet your funding needs.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Melissa Wylie
Melissa Wylie |

Melissa Wylie is a writer at MagnifyMoney. You can email Melissa at melissa@magnifymoney.com

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Small Business

10 Ways to Advertise Your Business for Free

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

advertise business free
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Your budget as a small business owner may not always have room for advertising, but you still need a strategy for building brand awareness with potential customers. Thanks to online resources and digital tools, there are plenty of ways to advertise your business without spending a single dollar. And don’t worry, you’re not alone in looking for low-cost marketing hacks — 42% of small businesses invested only 3% or less in marketing last year, according to small business software company Wasp Barcode Technologies. Here are 10 options to get you started.

1. Social media

Small business owners can create free pages and accounts for their businesses on Facebook, Twitter, Instagram and other social media platforms. You can create posts to promote your business, and most platforms may offer special insights for business account holders. For instance, Facebook and Instagram let you explore the reach of your posts, including impressions, interactions and the number of times people follow the link to your website. Such tools are free, though it will cost to place ads on social media platforms that may reach more people.

By the way, even though it costs to use Google Ads, it’s free to use the search engine’s analytics to see who’s visiting your business’ website and what customers do when they get there.

2. Email marketing

Some email marketing platforms offer free services or a no-cost trial period. Using a free service like MailChimp, you could send messages about your business to anyone on your contact list, as long as it doesn’t exceed 2,000 names. Email marketing platforms not only allow you to send thousands of emails notifying your customers of deals, news or changes, you can also track which ones draw the greatest response. You’ll know when customers open an email — or delete it — and even when they click on a link to buy.

3. Review websites

Review sites like Yelp can get your business name in front of many potential customers. To use these sites to your advantage, you should make sure your profile accurately reflects your business and brand. Yelp encourages business owners to respond to customer comments with a direct message or public comment. Uploading photos, links and hours of operation to your business’ Yelp profile would help customers find you. Yelp also offers analytics and tracking to provide insight into how users engage with your business.

Looking for business financing? Check out our top picks for small business loans here

4. Online listings

Online platforms like Thumbtack connect businesses with people searching for certain services. Creating a listing for your business would put your company in front of people in your area looking for your specific services. Registering your business with Thumbtack is free, and you’d only pay when a customer reaches out to you to schedule an appointment or request a quote.

5. Local directories

Make sure your business is registered with free local business directories and that all listed information is accurate. If you are willing to pay some fees, you could also register with your local chamber of commerce or the Better Business Bureau.

6. Media opportunities

Responding to reporter inquiries would help you get your name – and your business’ name – in front of an audience. Signing up for a sourcing service like Help a Reporter Out would give you the ability to connect with journalists who are covering topics related to your industry. You may be able to get featured in smaller and larger publications.

7. LinkedIn Groups

LinkedIn Groups allow people to connect over a shared interest or industry. You could join a group and start or contribute to conversations, forming connections that may be valuable to your business. If you’re willing to jump through a few more hoops — and are a freelancer experienced in your field — you could apply to become a LinkedIn ProFinder. ProFinder connects consumers with professionals in such fields as accounting, software development and business consulting. The service is free to try, but a Premium Business subscription is required after the first 10 proposal responses.

8. Free samples or coupons

Free trials or samples would give prospective customers a risk-free opportunity to interact with your business, which could lead them to feel more comfortable purchasing something down the road. Giving out coupons could generate return visits to your business and help you expand your customer base.

9. Community events

Getting involved in your community would allow you to connect with potential customers in your immediate area. While you’d likely have to pay to sponsor an event or set up a booth, simply attending could be a useful networking opportunity. Be sure to choose events that your target customers would most likely attend.

10. Become an industry expert

To build credibility, you could set up a blog on your website to showcase your industry knowledge. You could explain trending topics in helpful posts that address common challenges in your field. Contributing to trade publications and making guest speaking appearances at educational institutions or local events would help you establish yourself as an expert and bring attention to your business.

You don’t need to have a large advertising budget to market your business — you just need to think creatively about the resources at your disposal. Taking advantage of social media and free online resources would help you build awareness of your business without breaking the bank. You could focus on connecting with your local community or broaden your reach outside of your area. If you remain resourceful, the opportunities to advertise your business could be endless.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Melissa Wylie
Melissa Wylie |

Melissa Wylie is a writer at MagnifyMoney. You can email Melissa at melissa@magnifymoney.com

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Small Business

Top SBA Lenders: Find the Best SBA Loans for Your Business

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

SBA loans
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Starting a new company or growing an existing business costs money, and you’ll probably need to borrow funds to help you along the way. Loans from the U.S. Small Business Administration (SBA) are among the most popular and desirable financing options for small business owners. SBA loans typically have competitive terms and interest rates, and businesses that do not qualify for traditional business loans may be approved for SBA loans. Because these loans are in high demand, the application process can be strenuous. Before you get started on an application, we’ll help you understand the top loan options from the SBA and where to find them.

What is the SBA?

The SBA was created in 1953 to protect the interests of small-business owners and help them start and grow their entities. The SBA serves business owners in the U.S., Puerto Rico, U.S. Virgin Islands and Guam.

The SBA provides resources to guide new entrepreneurs through each step of launching a business, from making a plan to registering their businesses and managing day-to-day operations. The SBA has several funding programs to assist small-business owners in need of capital. These programs offer business loans, investment capital, disaster assistance, surety bonds and grants.

Rather than lending money directly, the SBA works with lending partners to issue loans to small businesses. These partners could include banks, community development organizations and microlending institutions. The SBA guarantees loans and reduces the risk for lenders, which makes it easier for small-business owners to be approved for financing.

To be eligible for an SBA loan, you must operate a for-profit business in the U.S. or its territories and you must have invested your own time or money into the business. The SBA also considers your business purpose, location, size, ability to repay and your personal character. You must have exhausted all other financing options before applying for SBA loans.

3 types of SBA loan programs

Three SBA programs are the 7(a) loan program, the 504 loan program and the microloan program. These loans range from small to large and can be used for a variety of business purposes. The SBA also offers export assistance loans, short-term and working capital loans. An SBA-approved lender can make sure you apply for the right loan for your business needs.

SBA loan programs at a glance

SBA Loan TypeLoan AmountTermInterest RatesFeesBest For
7(a) loanUp to $5 millionUp to 25 yearsMaximum of 12.81% for fixed-rate loans; maximum of the prime rate* plus 4.75% for variable-rate loansGuarantee fee of 0.25% to 3.75% of loan amountStartup costs, business expansion or machinery, furniture or supply purchases
504 loanUp to $5.5 million10 to 25 yearsFixed rate determined when loan is issued, though typically lower than 7(a) ratesAbout 5% of loan amount in feesReal estate or equipment purchases
MicroloanUp to $50,0006 years6.5%-9%; the average in fiscal year 2017 was 7.5%No guarantee fee, but borrowers may be charged application and origination fees up to 2% of the loanLow-income, minority, veteran and women entrepreneurs 

* Prime rate based on the current market interest rate.

7(a) loan program

The SBA’s most popular program is the 7(a) loan program. For small-business owners, 7(a) loans can cover the purchase of new property, machinery, furniture or supplies. You could also use a 7(a) loan to pay for startup costs or refinance existing debt. Before applying for a 7(a), you must be able to prove you have used all other sources of capital, including your personal assets.

The 7(a) loan program offers lower down payments and more flexibility than other financing options. Most 7(a) loans require monthly payments of combined principal and interest. Fixed-rate 7(a) loans would require the same payment each month because the interest rate would remain constant. Variable-rate 7(a) loans would require a different payment amount each month as the interest rate changes.

504/CDC loan program

The SBA’s 504 loan, also called a Certified Development Company loan, helps small-business owners expand through real estate and equipment purchases. You could use loan funds to buy land, existing buildings, long-term machinery or new facilities. But 504/CDC loans cannot be used to fund working capital or inventory, or to consolidate or refinance debt. You also cannot use the funds to invest in rental real estate.

Similar to a 7(a) loan, you must have used all other financial resources, including personal funds, before applying for a 504/CDC loan. To be eligible, your business must be worth less than $15 million and you must have a net income no higher than $5 million after taxes for the two years before applying. You must also be able to repay the loan on time using the projected cash flow of your business.

Microloan program

SBA microloans are smaller than average business loans, usually amounting to about $13,000. The SBA microloan program provides funding to nonprofit microlenders who then issue loans to women, low-income, veteran and minority business owners. Each microlender has its own lending and credit requirements, but applicants would generally be required to provide collateral, a personal guarantee and possibly complete a training program.

Microloans can be used to fund working capital, inventory purchases, furniture, machinery or equipment. You cannot use a microloan to pay off existing debt or to purchase real estate. The amount of your loan, your planned use for the funds and your business needs would determine the repayment terms on your microloan.

Top SBA lenders

Top 7(a) lenders

If you’re looking for an SBA loan, you may want to apply for a 7(a) loan, as it’s the most popular offering from the SBA. You would need to submit an application at an SBA-approved lender in your area. Here are the 10 most active SBA 7(a) lenders, per the most recent available data:

1. Live Oak Banking Co.

Approval amount: $1.27 billion
Approval count: 858

2. Wells Fargo Bank, National Association

Approval amount: $1.20 billion
Approval count: 3,898

3. The Huntington National Bank

Approval amount: $826.28 million
Approval count: 4,628

4. JPMorgan Chase Bank, National Association

Approval amount: $605.07 million
Approval count: 2,604

5. Newtek Small Business Finance Inc.

Approval amount: $559.21 million
Approval count: 767

6. Byline Bank

Approval amount: $513.65 million
Approval count: 454

7. Celtic Bank Corp.

Approval amount: $421.43 million
Approval count: 1,213

8. Compass Bank

Approval amount: $357.78 million
Approval count: 821

9. First Bank

Approval amount: $357.46 million
Approval count: 332

10. U.S. Bank, National Association

Approval amount: $351.06 million
Approval count: 2,286

Top 504/CDC lenders

If you need funding to make a large real estate or equipment purchase, a 504/CDC loan may be your best bet. Here are the 10 most active 504/CDC lenders*:

1. CDC Small Business Finance Corp.

Approval amount: $298.93 million
Approval count: 250

2. Mortgage Capital Development Corp.

Approval amount: $238.23 million
Approval count: 213

3. Empire State Certified Development Corp.

Approval amount: $213.63 million
Approval count: 204

4. Florida First Capital Finance Corp.

Approval amount: $191.69 million
Approval count: 201

5. Florida Business Development Corp.

Approval amount: $158.59 million
Approval count: 192

6. Mountain West Small Business Finance

Approval amount: $146.01 million
Approval count: 175

7. Business Finance Capital

Approval amount: $125.92 million
Approval count: 116

8. California Statewide Certified Development Corp.

Approval amount: $120.17 million
Approval count: 119

9. Small Business Growth Corp.

Approval amount: $108.23 million
Approval count: 168

10. Colorado Lending Source Ltd.

Approval amount: $98.21 million
Approval count: 114
*As of Aug. 31, 2018

The bottom line

Business owners typically covet SBA loans because they offer longer terms and lower interest rates than other term loans. Because the SBA backs the lenders issuing SBA loans, borrowers can often receive favorable conditions.

But the application process could be lengthy, and it could take 60 to 90 days before you receive funding. Application requirements could include collateral, a down payment and a minimum personal credit score of 680. The SBA also prefers profitable businesses that have been operating for at least two years and generate at least $50,000 in annual revenue.

If you’ve got the time and patience to withstand the underwriting process, an SBA loan could be a suitable option to fund your business needs. Be sure to check with an SBA-approved lender to make sure you apply for the right product to fit your business. Take into consideration the projects and purchases you plan to fund with your loan, as that would impact which financing option would be best for you.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Melissa Wylie
Melissa Wylie |

Melissa Wylie is a writer at MagnifyMoney. You can email Melissa at melissa@magnifymoney.com

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