The Best Alternative Loans for Bad Credit Loans

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.

While a poor credit score will eliminate you from consideration with many alternative lenders, it doesn’t with OnDeck. While the majority of OnDeck borrowers have a credit score of at least 660, the lender considers everyone with a credit score above 500. This is one of the lowest minimum credit scores we found among all the alternative lenders we analyzed. Most of the other lenders we considered require credit scores 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 a year and have at least $100,000 in revenue over the past 12 months.

Of all the alternative lenders we looked into, OnDeck had one of the quickest application and approval processes. You can fill out an application in just a few minutes by going online or 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 conduct hard credit checks.

OnDeck also looks at your last three months of 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 hard copies of your 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.

Loan Terms

OnDeck offers both term loans and lines of credit. 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 clearly defines all of its loan terms on its website.

OnDeck offers term loans up to $500,000. 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 offer 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 you can use the loans 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 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 23.6 percent. It charges a one-time origination fee of 2.5 to 4 percent.

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 Having the money automatically withdrawn helps with your cash flow and prevents you from missing larger monthly payments.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

Lines of credit up to $100,000 are also available from OnDeck. Interest rates for lines of credit are as low as 13.9 percent, with average rates at 34.1 percent. There is also a $20 monthly maintenance fee. However, that is waived if you take out $5,000 on your first draw.

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

Loan specialists immediately answered each of our calls, and, instead of quickly trying to sell us on a loan, they took the time to answer all of our questions. 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 one- or two-word answers and generally seemed disinterested in making sure we had a clear understanding of how their loans worked. By the end of our calls to OnDeck, we had a clear understanding of its loan programs.

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.

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

The biggest downside of OnDeck is that it only offers 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 guarantee. 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, 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. According to the BBB website, as of August 2017, there were 39 complaints against OnDeck over the past three years. Of those, nine were resolved to the satisfaction of the complainant. All of the remaining complaints were addressed by OnDeck, but the complainant did not accept the response or the BBB has not heard back from them on their satisfaction. It’s important to note that most 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 500 is 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 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.