Funding Circle vs. OnDeck: Which small business lender is right for you?

Funding Circle and OnDeck focus primarily on term loans and business lines of credit, though Funding Circle can match you with a partnering SBA lender. They both accept fair credit borrowers, too — but they cater to businesses at slightly different phases.

Funding Circle works well for low-revenue businesses with a few years behind them already. But with OnDeck’s same-day funding, this lender makes more sense for credit-challenged businesses needing an immediate infusion of cash. It allows businesses with just one year in the market to apply.

Let’s look closer at each lender’s key loan features to help you decide between the two.

Funding Circle vs. OnDeck at a glance

Both Funding Circle and OnDeck offer online business loans accessible to low-revenue businesses. Their credit requirements are also similar, accepting scores in the fair credit range.

While both offer term loans and business lines of credit, Funding Circle goes a step above by offering SBA 7(a) loans through partner lenders. It also keeps starting interest rates low, which is unusual for an online lender. As one of the best short-term lenders available, OnDeck’s specialty is business loans with quick repayment terms and same-day funding if you apply early.

Funding Circle business loans

Funding Circle sticks with a few business loan choices: term loans, business lines of credit and SBA 7(a) loans. The lender grants long payment terms of up to seven years for term loans or 10 years for SBA loans — in the online space that often keeps terms short. It’s also not typical for an online lender to offer SBA loans, even through lending partners, as is the case with Funding Circle.

Another feature is its low revenue requirements, accepting revenue down to $50,000 annually. Most lenders set the lowest standards at $100,000 annually, and many, like traditional banks, go higher. The biggest kickers are that you need at least two years in business, and origination fees run high, from 4.49 percent to 10.49 percent.

Pros

• Low revenue required
• Long terms
• Low starting interest rates

Cons

• High origination fees
• Not available to startups
• Few types of loans

OnDeck business loans

OnDeck business loans cater to fair credit borrowers who don’t qualify for traditional business loans with low loan amounts. It provides business lines of credit up to $100,000 and short-term loans up to $250,000. Its line of credit offers flexible repayment options from 12-, 18- or 24-month terms.

OnDeck’s loan requirements are lenient, though standard for an online lender. To qualify, you need a personal credit score of at least 625, one year in business and annual revenue of $100,000. But the lender keeps its interest rates high, with an average annual percentage rate (APR) of 55.90 percent for lines of credit and 56.10 percent for term loans.

Pros

• Same-day funding
• Relaxed requirements to apply
• Builds business credit

Cons

• High interest rates
• Smaller loan sizes
• Few types of loans

How to choose between Funding Circle and OnDeck

While Funding Circle and OnDeck both work well for online business lines of credit or term loans, each offers distinct features that should help you choose between these business lenders.

Funding Circle can take businesses with unusually low annual revenue of $50,000 (OnDeck’s minimum is $100,000). It offers slightly higher loan limits at $250,000 for lines of credit and $500,000 for term loans.

That’s compared to OnDeck’s maximum $100,000 for lines of credit and $250,000 for term loans. But OnDeck is more accessible to younger businesses at least a year old, whereas Funding Circle doesn’t serve businesses under two years old.

Choose Funding Circle for long-term loans

Funding Circle offers long repayment terms for an online lender. Small business owners can qualify for up to seven years for a term loan or 10 years for an SBA 7(a) loan.

These terms are long, but it’s important to note that many SBA lenders offer 25-year loans specifically for real estate. Funding Circle isn’t a direct SBA lender, but it matches you with SBA lenders if you apply through them.

Meanwhile, OnDeck provides short-term loans with repayment terms of up to 24 months. Its business lines of credit also offer flexible and short terms of 12, 18 or 24 months, whereas most lines of credit often stop at 18-month terms.

Choose OnDeck for fast funding

Many online lenders market themselves as best for fast approvals, but OnDeck’s business loan process takes it to a new level. If you apply before 10:30 a.m. on a business day, you could see funds deposited by 5 p.m. your time. But if you don’t make that time window, your OnDeck business loan might get a more temperate two- to three-day approval instead.

But Funding Circle isn’t a slow lender either. Once you apply online and submit business documents, you’ll hear back from an account manager within 24 hours. You could receive funds within 48 hours total from end to end as long as your business is approved. The choice between the two might come down to the size of your loan and just how immediately you need business financing.

Alternatives

You may find neither Funding Circle nor OnDeck provides the loan options your business needs or can qualify for, and you need an alternative.

Fundible offers wider business loan choices, expanding from lines of credit and term loans to equipment financing, bridge loans, invoice financing and SBA loans. Not only can business owners achieve financing from $1,000 into the millions of dollars, but it also accepts startups with just six months of experience and 450 to 500 credit scores for some loans.

For the best chance of getting long repayment terms or low interest rates, you could go with a traditional bank. Bank of America spans many types of business loans, including some options with accessible requirements. For example, its cash-secured line of credit is good for startups with just $50,000 in annual revenue. Its unsecured line of credit accepts $100,000 in annual revenue and two years in business.

SBA loans

SBA loans are a great chance to get a business loan when you don’t qualify with a traditional lender. Funding Circle doesn’t directly offer SBA 7(a) loans but matches businesses with SBA lenders.

Most SBA loans take 30 to 90 days to approve. SBA 7(a) loans work great for nearly any working capital expense that would boost your business’s growth.

But, SBA microloans can make SBA loans even more accessible. SBA microloans provide up to $50,000 through nonprofit lenders, often seeking to support disadvantaged businesses through training and education.

Community Advantage Small Business Lending Companies also offer loans through a myriad of nontraditional, community-focused lenders. These lenders look to develop businesses in specific demographics or industries, such as low-income communities.

Bottom line

Funding Circle and OnDeck work great for online lending to businesses with fair credit or stronger. If you’re looking to stretch payments over a long term or need higher loan amounts, Funding Circle might be the way to go.

But if you wouldn’t normally qualify elsewhere or need speedy, same-day funding, OnDeck could offer the accessible loan options you need. Neither lender uses hard credit pulls, so you could apply with both and compare the offers in terms of repayment timelines, loan amounts and interest rates. Either way, see how these lenders fare against other top small business lenders available.

Frequently asked questions

• What credit score do you need for Funding Circle?

  Funding Circle accepts business owners with personal credit scores of 660 for term loans and lines of credit. If you need an SBA loan through one of its partner lenders, it lowers the requirement slightly to a score of 630 for a single owner.

• What type of loans does OnDeck offer?

  OnDeck’s business loan products specialize in business lines of credit and short-term loans. Its limited options are comparable to other lenders providing business loans online.

• Does OnDeck require collateral?

  Yes, both OnDeck business loans require a general lien, meaning that all your business assets are collateral for the loan. Like many business loans, you’ll also be required to sign a personal guarantee. This makes you personally liable to repay business debts.