OnDeck is an online lender offering small business term loans up to $500,000 and lines of credit up to $100,000. They lend to businesses in all 50 states across a number of different industries, including restaurants, retailers, healthcare professionals, contractors, and more.

Their short term loan product offers loans up to $250,000 with 3-12 month repayment terms. The long term loan is available up to $500,000 with 15-36 month repayment terms.

Over the years, OnDeck’s loan products continue to improve for business owners. This time last year, we reported that OnDeck’s average APR for small business borrowers was 51.2%. Their most recent quarterly report indicates that their average APR has come down even more to 41.4%.

41.4% is still a high APR in the realm of small business loans, considering players like Lending Club, Funding Circle, and Dealstruck top out around 30% APR, but OnDeck offers a quick turnaround time (as little as 24 hours) 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!)

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

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’s marketplace, 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.