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small business boomers

On Deck Capital: Innovative Funding Source for Baby Boomer Businesses

by Jean on October 29th, 2008

One result of the credit/banking crisis has been a new wave of lenders who can help you get loans for your small business when other traditional lenders cannot. A recent Wall Street Journal article detailed one such lender, On Deck Capital. Instead of requiring you to put up assets for more traditional types of loans, On Deck lets you leverage your cash flow for loans up to $100,000.

If you are like a lot of other small business owners, you may be finding it difficult to get a traditional loan. On Deck says that 65 percent of small businesses seeking loans don’t qualify, so you’re not alone.

The On Deck criteria:
• You have a business checking account;
• You must have been in business at least one year;
• You must process at least $3,000 in credit card transactions every month

If you don’t accept credit cards, you should have been open at least two years and have an average business bank account balance of at least $3,000 a month.

To apply for a loan from On Deck, you will need credit card statements and bank account statements, to prove your cash flow. I didn’t see any requirement that you have a business plan.

You can receive approval within 2 days, and your loan can be funded within 7 days; that’s great if you need money quickly. The typical term of the loans is 1 year.

The other unusual thing about On Deck is that you pay off the loan every day; they take the money directly from your business bank account in what they call “micro-payments.” So rather than having to come up with a large amount of cash every month, you can pay off your loan a little at a time. This might be a problem if your business cash flow is cyclical, so if you get a loan from On Deck, you’ll have to watch to make sure you have enough in your account every day.

Their interest rate is high (18% to 36%) but the short term of the loan means you don’t have that long to pay, and this is basically an unsecured loan, with no assets pledged except the cash flow of your business.

I’m not advocating for or against this source of financing. Do your homework and consider it if you need funds and you can’t get them from other more traditional sources.

To learn more about On Deck, go to their website, and look at the press releases and other information. You might also want to ask for references from other borrowers. Getting good information before you make a decision to borrow money is always a good idea.