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Why Ondeck’s Line of Credit Program Isn’t a Good Deal

When it’s time to look for a business line of credit, you’ll likely go online and find large lenders such as OnDeck Capital at the top of the search ranking. However, a highly-ranked position doesn’t mean that’s the best option for your business. As a small business owner, there are many reasons why a large lender may not be the best fit for your lending needs, especially for a business line of credit.

What Is a Business Line of Credit?

Whether the business line of credit is a Capital One business line of credit,  from a credit union, or OnDeck Capital, the line is a type of short-term funding option for companies looking for extra cash. Sometimes, the money is needed for emergency operational business expenses such as payroll or equipment repair. However, savvy entrepreneurs know the best time to get a business line of credit is before you need it—so you can take advantage of unforeseen opportunities when they become available. For cash flow needs, an instant business line of credit serves as a business’s backup emergency reserve, ready to draw from when needed.

Not all lenders offering a business line of credit may be available for your company. For example, OnDeck Capital does not lend to many industries and is not available in all states. In addition, OnDeck does not offer a line of credit for nonprofit organizations if you’re running a nonprofit.

How Does a Business Line of Credit Work?

A business line of credit is revolving credit, similar to a credit card. Borrowers are preapproved for a set credit limit based on their credit history (among other things), and they may borrow the sum of funds needed for whatever business needs they choose. Unlike a small business loan, where borrowers get a lump sum and have set monthly payments until the loan is paid off in full, with a business line of credit, borrowers only make payments on the portion of the loan they have withdrawn. Then, once the withdrawn amount has been repaid, the funds are available to draw upon again. You can find business lines of credit where you only have to make a payment on the amount of money you’ve drawn, but OnDeck charges a monthly fee whether or not you use your line of credit.

There are two types of business lines of credit: secured and unsecured—each having pros and cons. With a secured line of credit, the loan is backed by the borrower’s collateral, such as equipment, property, and accounts receivables. If the borrower fails to make the payments, the lender can seize the company’s collateral. Because lenders take on less risk, secured business lines of credit have better terms, including lower interest rates. However, if you take out a secured business line of credit, you risk losing valuable (and sometimes personal) assets.

Unsecured lines of credit, on the other hand, do not require collateral and, therefore, do not put business owners at risk of losing assets. Another positive is that unsecured business lines of credit have quicker approval times because there is no collateral to appraise. However, unsecured loans have a downside—you may not get the best small business line of credit rates.

What to Look for in a Business Line of Credit?

Before entering into any financial commitment, it’s crucial to do your homework and understand the loan terms and what the lender expects. For example: Are there any setup and/or maintenance fees? How are payments scheduled? Do you have to make monthly payments throughout the life of the loan or only when money has been drawn? Are the interest rates variable or fixed? How long is the loan for, and can it be renewed?

You should also make sure you are eligible for the business line of credit before you take the time to fill out the application. An OnDeck business line of credit may not be the best for you because it requires you to be in business for at least one year, have a minimum 625 personal FICO score, and have $100K in annual revenue. In addition, OnDeck’s loans are not available in all states, so your state may not be covered. OnDeck’s interest rates start at 29.9% and could go as high as 97.3% APR, not including the monthly fees it charges just to have a line available.  Finally, OnDeck requires a business lien and personal guarantee.

 

Why Financing Solutions is Better for Your Business Line of Credit

Financing Solutions offers an unsecured line of credit for businesses. There is no charge to set up the line and nothing to repay until you use it, so it is a perfect small business backup plan.

Your business must be at least two years old with less than $5 million in assets to be eligible for a line of credit from Financing Solutions. The process is quick and easy, and the line will remain open for up to 12 months. In most cases, you can get the money you need in less than 48 hours.

Financing Solutions is an alternative lender offering an easy application process (it takes less than two minutes to fill out) and requires no collateral or documentation to get a written offer letter. Other alternative lenders have a much longer application process and can be quite expensive.

The founders of Financing Solutions have started and grown several companies together, so we understand how important it is for entrepreneurs to keep costs low. That’s why we don’t charge you to set up the credit line, and there are no maintenance fees. We don’t ask for personal guarantees, and applicants can receive a no-obligation offer letter the same day. We make approval decisions based on our decade of experience working with small businesses. Find out today why we have five-star ratings from the Better Business Bureau and Google. Also:

A business line of credit is an excellent source of funding available whenever your company needs it, without the heavy burden of term loan requirements. If you want to see if your small business would be approved and for how much, please fill out the no-obligation, 2-minute line of credit application here.

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