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Review of OnDeck Lines of Credit

For many small business owners, managing company finances and cash flow can be one of the more complex aspects of the job.  A business line of credit can assist in situations where the company needs some extra funds to handle daily expenses, but may not find it necessary to take out a commercial loan.

What Is a Business Line of Credit?

A business line of credit is an agreement between a customer and a financial institution, such as a bank, where a customer can withdraw money up to a certain amount.  The agreement establishes a maximum loan balance, and the customer can draw down, or withdraw, funds from that balance at any time, provided that the customer does not exceed the maximum amount set forth in the agreement.

The primary benefit of a business line of credit over a commercial loan is that a business is typically only charged interest on the part of the loan that is used.  Additionally, business owners can withdraw money as needed, rather than taking out a loan for an amount that may be greater than their current needs.


Business lines of credit can be useful for a number of purposes, such as handling daily expenses like payroll or inventory.  When a company has uneven cash flow, a business line of credit can help it manage its finances and ensure that it has sufficient funds on hand to meet its ongoing obligations.  However, lines of credit should not be used to help manage ongoing financial emergencies or bail a company out of financial trouble.  They are generally used as tools to help tide a business over until accounts receivable come in or checks from clients clear.

Obtaining a Commercial Line of Credit Through OnDeck

The need for a line of credit may arise somewhat suddenly.  For this reason, obtaining funding through a traditional brick-and-mortar bank may be impractical.  A bank typically requires mountains of paperwork, and a lengthy application process in order to be approved for a business line of credit.  A bank may not approve a line of credit for an extended period of time, and it may take even longer for the bank to make funds available for withdrawal.  During this time, a small business may be struggling to make ends meet and may have difficulty making payroll, paying vendors or even paying bills.


For these business owners, OnDeck may be the solution.  As a private commercial lender, OnDeck is able to offer approval for business lines of credit within minutes.  Once approved, funds for lines of credit are available for withdrawal in as little as twenty-four hours.  OnDeck can approve loans so quickly because — unlike traditional banks, which rely on paper applications — it process loans online or via telephone.  Using algorithms, OnDeck examines more than 2,000 data points to analyze information such as real-time business cash flow, online customer reviews and credit scores.  Based on this information, OnDeck can approve a business for a line of credit in as little as ten minutes — and make funds available for withdrawal as soon as the next business day.


Of course, a commercial line of credit through OnDeck is not necessarily the best option for every small business owner.  Although OnDeck allows quick approval and access to cash, there are some disadvantages that you should be aware of before applying.  Read on to learn more about OnDeck’s lines of credit for small business owners.

Advantages of OnDeck Lines of Credit

The biggest benefit of applying for a commercial line of credit through OnDeck is simple: you can be approved relatively quickly, with a minimal amount of paperwork, and get access to your funds fast.  If you are struggling to meet your daily expenses due to uneven cash flow or outstanding accounts receivable, then this makes an OnDeck line of credit a particularly attractive option, particularly when compared to going through the traditional bank process.  You will simply need to provide some basic information, such as your driver’s license and Social Security number, one to three months of company bank statements, three months of credit card statements, and a business tax identification number.  You will receive a decision on your application within minutes (typically ten), and can have access to your line of credit in as little as twenty-four hours if you are approved.


OnDeck also has looser requirements for lines of credit than traditional banks.  For example, most banks require business owners to have a personal credit score of at least 720 to even consider them for a business line of credit.  For OnDeck, the minimum credit score is 600.  Banks want a business to have an operating history of at least two years, while OnDeck only requires one year of operating history.  However, the average OnDeck borrower does tend to have higher qualifications than these minimums.  The majority of borrowers have a minimum credit score of 660, and their businesses have a gross revenue of over $450,000 and have been in business for more than seven years.

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Disadvantages of OnDeck Lines of Credit

There are some significant drawbacks to taking out a line of credit through OnDeck, however.  Perhaps the most significant disadvantage is the cost: the annual percentage rate (APR) for a line of credit through OnDeck can range from a 14% to a staggering 40%. These APRs include a $20 monthly maintenance fee, which is waived for the first six months if you withdraw $5,000 of more within five days of opening the credit line.  OnDeck does not charge a fee to withdraw money from the line of credit.


OnDeck also requires frequent repayments for its lines of credit.  Payments will be automatically deducted on a weekly basis from a business bank account.  If a business is already struggling with uneven cash flow — which is often the reason that a company takes out a commercial line of credit — this weekly repayment schedule could make the situation even more dire.


Finally, although OnDeck provides lines of credit to a wide variety of small businesses, with a range of revenues, OnDeck maintains a list of “restricted industries.”  If your small business falls into one of these industries, then OnDeck will not extend a line of credit to you, even if you otherwise meet its qualifications for a loan.  The “Restricted Industry List” includes the following:

  • Financial Services and Investments
  • Sellers (such as Flea Markets and Magazine Subscriptions)
  • Vices (such as Drug Paraphernalia and Dispensaries)
  • Vehicle & Power Equipment Sales
  • Services/Administrative Outsourcing (such as Payroll Companies and Attorneys)
  • Travel & Transportation (such as Marinas and Travel Agencies)
  • Miscellaneous (such as Funeral Homes and Religious Organizations)

Commercial lines of credit can be a useful tool for a small business, and the lines of credit offered through OnDeck may be a great choice for some business owners.  With fast approval and quick disbursement of funds, OnDeck can help companies meet an immediate need.  However, small business owners should be aware that these lines of credit can be incredibly expensive, and require weekly repayments.  The terms of these loans may be onerous for some small businesses, which is why anyone considering a business line of credit through an alternative lender like OnDeck should carefully read the terms and conditions before signing any contracts.