Case Study of Online Lending Company: OnDeck

by Business Case Studies on Monday 22nd January, 2018

Online lenders have gained in popularity since the global financial crisis of 2008. The failure of big banks to stabilize the financial markets served as a catalyst to many FinTech companies to start providing expert financial services to clients. One of the most notable online lenders to emerge is OnDeck. As one of the premier FinTech companies, OnDeck has been in the industry for 11 years. Founded in 2007, this FinTech enterprise utilizes sophisticated technology in the form of algorithms to determine eligibility for online loans. Among the many benefits of using this online loan provider are the rather relaxed qualifications, the competitive fees and loan terms, lenient requirements vis-à-vis credit scores, and the short application process.

Fintech and Online Lenders

The rapid rise of FinTech Enterprises in the aftermath of the global crisis has served to satiate a need in the un-banked and underbanked components of the economy. Algorithmic decision-making has streamlined the loan approval process dramatically. Traditionally, loan approvals can take days or weeks, depending on the financial institution in question, the loan amount, and the credit profile of the borrower.

With OnDeck, the company has successfully managed to formulate a functional algorithm that can determine credit viability within minutes. Among its many products are short-term loans for qualified business owners. The public’s perception of this lender has ebbed and flowed over the years. On the plus side, businesses that don’t qualify for bank loans have another viable option in the form of online lending services. However, the lack of transparency in lending practices has often raised questions among borrowers about the viability of such services.

To date, OnDeck has garnered a mix of favourable ratings, and questionable ratings from borrowers. However, there are many positives to using this online lender’s services, given that they don’t have stringent requirements vis-à-vis the credit profile of customers. In fact, multiple OnDeck reviews across the web confirm that this online lender is one of the most lenient and accepting in terms of credit scores, and paperwork requirements. Most borrowers using the services of OnDeck have been in business for at least 7 years.

Their annual revenues amount to $450,000 +, and their Fair Isaac’s Corporation (FICO) credit scores are in the range of 660+. Further analysis has confirmed that their average annual interest rate currently runs at 9.99% on the low end, and for other lines of credits begins at 13.99%. However, these rates are not ironclad. It depends on your credit score, the viability of your business, and the decisions made by the lender.

Short Term Loans and Lines of Credit

Be advised that this online lender requires repayment of short-term loans on a daily, or a weekly basis. This means that sufficient funds need to be moving through your account to ensure that payments can be processed. This online lender requires borrowers to have been in business for at least 12 months, with a credit score of at least 500. The company must be generating revenue of at least $100,000 per annum. If you are seeking short-term loans, or other lines of credit, OnDeck is worthy of consideration. However, it is always important to read the fine print – terms and conditions of loans, repayment periods, and interest rates to ensure compliance.

The typical borrowing amounts range from $5000 – $500,000 from 3-36 months. The origination fees for loans start at 2.5% and go as high as 4%, and the effective annual percentage rate is determined by the prevailing interest rates (federal funds rate) and the interest rates at the lender. Stats for lines of credit typically allow for loan amounts between $6,000 and $100,000 with a draw term length of 6 months. There are no draw fees, and maintenance of the loan account is typically $20 per month. The annual percentage rate begins at 13.99% and personal guarantees for collateral are needed.

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