OnDeck Capital has fired Smarter Finance USA as a broker.
They were very nice about it and all...
....the email was an invitation to join their merchant referral program.
oh, but, they'd consider taking applications from us again in the future.
(No thanks, but the offer is appreciated).
Why did OnDeck drop the hammer on us?
Read on for one of the most honest Ondeck reviews on the Internet.... Here's the Truth:
We got fired because we had never submitted a single application to OnDeck.
What are the Problems With OnDeck Loans?
Nothing is wrong with OnDeck...
For some situations, they could potentially be a great solution.
They fund lightning fast and are pretty loose with the documentation they need.
A lot of small business loan professionals love OnDeck.
The only problem for us:
We rarely see a situation where you would be better served going through OnDeck than with one of the cheaper alternatives in the marketplace.
Here's something we hate:
To get paid for placing you with a loan, we have to add "points" to the transaction.
Many brokers love this about OnDeck, since they allow you to add up to 12 points on a transaction.
That means you can get paid $6,000 in commissions for getting someone $50,000.
So Wait, What Does "Points" Mean?
On that 6 month $50k loan...
...12 points added to the top of it...
...this means adding another 47% as an APR.
Adding in the origination fee and what goes to the lender, your "solution" is a loan at over 100% interest rates.
Arrangements like this make for a lousy tradeoff between trying to do what's right for you, the small business owner, and making a living offering loans.
There are a number of investor sources that allow small business owners to get a loan and pay the same rate whether they found the source directly or whether they went through a broker.
What are Alternatives to OnDeck Capital?
We prefer to work with small business funding sources that will allow let us help you without having to juice youfor extra "points."
Some companies we work with have us add 2 to 3% to the origination fee, or invoice you separately for consulting fees on a two to five year loa.
That is a fair and reasonable compensation for time, adds a miniscule amount to your loan payments, and is much fairer to you than inflating your rate by enormous amounts so that we can get paid.
This is important...
...small business loans can be hard to shop for without using a broker, right?
There is so much crap in the marketplace and going through one of the "lead generation" websites means getting hammered with phone calls and emails for days from every sleazebag under the sun.
Depending on the situation, often we can arrange loans that range from 8.99 percent (as an APR, not a factor rate, and with no prepayment penalties) to 30 percent or so - which at the lower end is less than a quarter of the finance charges on an apples-to-apples basis compared to rates with Ondeck.
These loans are typically available to business owners with reasonable (at least 600) credit scores with at least 2 years in business and revenues of over $150,000 per year, and - depending on the product - range from 1-5 years to pay back - which results in much more reasonable payments than a 6 or 9 month loan.
When we can't get someone qualified for a loan like this, we may ask if you have collateral, and if so, often a sale-leaseback of business equipment makes for a better option. If none of these are available, then we may look at some daily-payment loan models, but not any that would make us jack your rates up by 10 points in order to be compensated.
Should You Avoid Small Business Loans With OnDeck?
No, not at all.
If OnDeck is right for you, there is nothing that makes them a bad lender.
While in many situations, much better financing can be found, any lender is free to charge whatever they want.
As the small business loan marketplace evolves, savvy borrowers will be better able to shop around and find honest small business loan facilitators.
In many cases, OnDeck may have the perfect solution for you, and if so we recommend you deal with them directly.
While they weren't the right solution for our business model, that doesn't mean they aren't right for everybody.