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OnDeck Review: Best Alternative Lender for Bad Credit Loans

Our 2017 research and analysis of alternative lenders leads us to again recommend OnDeck as the best alternative lender for bad-credit loans. We chose OnDeck from dozens of alternative lenders. To understand how we selected our best picks, see our methodology and a comprehensive list of alternative lenders on our best picks page.

OnDeck has low credit-score requirements, a fast funding process and excellent customer service. Here is a breakdown of why it's our best pick.

OnDeck is an appealing option for those with bad credit, because you don't need a high credit score to be approved. You just need a FICO score of at least 500 to be considered for a loan. Most of the other lenders we considered required credit scores of between 550 and 600.

However, the low credit-score requirement doesn't mean OnDeck approves loans for floundering businesses. It just means that instead of using credit scores as a primary factor in lending decisions, the company focuses on how businesses perform financially in terms of monthly revenue and cash flow. To be considered for a loan, you must have been in business for at least nine months and have at least $75,000 in revenue over the past 12 months.

Editor's Note: Trying to find the business loan that's right for you? Fill in the questionnaire below, and you will be contacted by our partner alternative lenders who will help you find the right loan for you.  

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We were pleased to see that OnDeck clearly outlines its minimum requirements on the company website. We had a difficult time finding this information for some of the other lenders we analyzed.

Of all the alternative lenders we analyzed, OnDeck had one of the quickest application and approval processes. You can fill out an application in 10 minutes by going online or by calling the lender and speaking to a loan specialist who will fill out an application for you.

OnDeck asks for basic information about your business — name, address, tax ID number, years in operation and legal entity — and requires you to provide your estimated gross annual revenue and average bank balance.

After you submit the application, OnDeck conducts a "soft" credit check. This is beneficial to those with bad credit, because it doesn't lower your credit score like a hard inquiry does. Many of the other lenders we examined only conducted hard credit checks.

OnDeck will also request your last three bank statements. You can provide these in two different ways. One option is to electronically authorize your bank to send OnDeck the information via a one-time import. This is the recommended option because it streamlines the approval process by quickly allowing OnDeck to review the data.

Providing your banks statements is ne of the final steps of the OnDeck approval process. You can do so by allowing your bank to send the statements electronically to OnDeck, or you can send, email or fax them on your own.

The other option is to send bank statements via mail, email or fax directly to OnDeck. The downside of this option is that a loan specialist needs to review the information manually, which can lengthen the time it takes to get approved.

Depending on how the bank statements are sent, approval can be completed in just a few minutes, with funds deposited into your account within 24 hours. This process was significantly faster than it was with most of the other lenders we researched, which took anywhere from three to five days to approve loans, and five to seven days to provide the funding.

What most impressed us about OnDeck was the transparency of its loan terms. Unlike other lenders, which seemed to want to hide the details of their loan programs, OnDeck had all of its loan terms clearly defined on its website.

OnDeck offers loans of between $5,000 and $5000,000. These are fixed-rate loans, with payments remaining the same over the life of the loan. The lengths of the loans range from three to 36 months. Most of the lenders we evaluated offered loans of only up to 12 months.

Although OnDeck does want to know how you plan to spend the money, there are no restrictions on what the loans can be used for. OnDeck loans are typically used for a variety of purposes, including working capital, new inventory or equipment, hiring of employees, expansion, remodeling, marketing, and cash-flow management.

OnDeck's interest rates vary by loan type. The short-term loans have a total interest percentage, which is the total amount of interest you pay as a percentage of your loan amount, including any fees, as low as 9 percent, with average rates of 19 percent.

The long-term loans have an annual interest rate as low as 5.99 percent, with average rates of 24 percent. This interest rate is the yearly interest percentage, excluding any fees, you pay based on your average loan.

OnDeck charges a one-time origination fee of between 2.5 and 4 percent.

OnDeck loans are paid back on a daily or weekly basis, with the same fixed amount automatically debited from your bank account. Having the money automatically withdrawn helps with cash flow and prevents you from missing larger monthly payments. Not all of the lenders we looked into offered this option.

We were pleased with the customer service we received from OnDeck. To test the company's customer support, we called the lender several times posing as a business owner interested in a loan.

A loan specialist immediately answered our initial call and, instead of quickly trying to sell us on a loan, took the time to answer all of our questions. During our first call, we discussed a variety of topics, including the minimum credit score required, how credit scores are used in the approval process, the other minimum requirements, the types of loans available, what the money could be used for, the loan terms and rates, and the origination fee. In subsequent calls, we received the same high level of service.

During all of our calls, loan specialists never rushed through their answers. They all took the necessary time to thoroughly discuss each question. Many of the other lenders gave short one- or two-word answers and generally seemed disinterested in making sure we had a clear understanding of how the lenders' loans worked.

OnDeck also offers live-chat support. We used this service several times to further inquire about various aspects of the loans. The live support answered all of our questions immediately and in just as much detail as we received over the phone. Most of the other lenders we considered failed to offer this additional customer-support outlet, and the ones that did weren't as responsive as OnDeck.

The loan specialists from OnDeck are available via phone, live chat and email Monday through Saturday. This was the only lender we researched that provided support over the weekend.

We also found OnDeck's website very valuable. It had tons of specifics on each of its loans, as well as a very helpful FAQ section.

OnDeck has a detailed FAQ section that provides answers a variety of questions about the loans offered, as well as the application and approval process.

The biggest downside of OnDeck is that it offers only secured loans. However, rather than requiring a specific value of collateral, OnDeck loans are secured by a general lien on the assets of the business and backed by a personal guaranty. This could be a turnoff for some businesses. If you don't want a lien placed on your business, we would encourage you to consider our second-place winner in this category, SnapCap. This lender offers unsecured loans and has a minimum credit-score requirement of 500 and an easy, one-page application.

We also found a variety of complaints about OnDeck that were filed with the Better Business Bureau (BBB). According to the BBB website, there were 15 complaints filed against OnDeck within the last year, and 38 over the past three years. Of those, 10 were resolved to the satisfaction of the complainant. All ofthe remaining 28 were addressed by OnDeck, however the complaintant did accept the response or BBB has not heard back from them on their satisfaction  It's important to note that nearly all of the alternative lenders we reviewed had some criticisms levied against them with the BBB. Despite the complaints, OnDeck is an accredited member of the BBB, with an A+ rating.

Another potential negative for businesses with bad credit using OnDeck is the minimum required credit score. Although the 500 score was the lowest minimum of any of the lenders we examined, it might still be too high for some businesses. The only lender we found that doesn't factor credit score into its loan-approval process is PayPal. This lender is our alternative best pick for best merchant cash advance. PayPal might also be the best option for online businesses already using the service to collect funds.

Ready to choose an alternative lender? Here's a breakdown of our complete coverage:

Editor's Note: Trying to find the business loan that's right for you? Fill in the questionnaire below, and you will be contacted by our partner alternative lenders who will help you find the right loan for you.  

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Chad Brooks

Chad Brooks is a Chicago-based freelance writer who has nearly 15 years experience in the media business. A graduate of Indiana University, he spent nearly a decade as a staff reporter for the Daily Herald in suburban Chicago, covering a wide array of topics including, local and state government, crime, the legal system and education. Following his years at the newspaper Chad worked in public relations, helping promote small businesses throughout the U.S. Follow him on Twitter.