About Ondeck Asset Pool, LLC

OnDeck Capital has put all hands on deck to deliver small business loans. The alternative, peer-to-peer lender uses its own pool of capital to lend to small businesses -- a market it believes is under served by large banks. To acquire lending capital, OnDeck uses a process called securitization, which involves taking out credit lines from banks and selling off pieces of the loans to investors. Alternatively, investors may also buy entire loans through the company's special marketplace. To help investors quickly asses risk and make their lending decisions, OnDeck offers proprietary data and analytics through its online tools. Founded in 2007, OnDeck has originated nearly $2 billion in loans.

IPO

OnDeck Capital held its initial public offering (IPO) on December 17, 2014. The company initially started the bidding of its 10 million shares of common stock at a price of $20 per share, but ended up blowing past expectations and raised $200 million with share prices closing at $27.81. The company plans to use the money to expand its lending business.

Geographic Reach

OnDeck's corporate headquarters are located in New York City, while its loan operations center is in Arlington, Virginia. Even though the online based company makes loans to small businesses in all 50 US states and Canada, around 15% of its loans are originated in California, while another 30% of originations come from Florida, New York, Texas and New Jersey.

Sales and Marketing

The company's client base includes small businesses from more than 700 industries carrying median annual revenues of $568,000, with around 90% of its customers having between $150,000 and $3.2 million in annual revenue. Its customers have been in operation for a median of 7.5 years, with around 90% of them being in business between two and 31 years.

OnDeck has dramatically increased its sales and marketing spend over the past few years, as it's worked to acquire more customers through its direct marketing, strategic partners, and funding advisor program sales channels. The company spent $18.1 million on sales and marketing in 2013, nearly tripling the amount it spent in 2012. In the first nine months of 2014 alone, it spent a record $21.8 million toward sales and marketing expenses.

Financial Performance

OnDeck's top line business has been growing at a healthy clip. The company's revenue spiked by 155% to an all time high of $65.2 million in 2013 as interest income grew after a record year of loan originations.

Despite record-high revenue, the company suffered another year of losses as it struggled to keep its operating expenses down. Net losses deepened by 44% to $24.4 million in 2013, mostly as the company had to take on more provisions for loan losses from increased loan originations, and because it spent $11.5 million more toward sales and marketing expenses to secure more -- and higher quality -- borrowers.

Cash levels improved despite the company's losses, with operations providing $14.1 million in 2013, or significantly more than the $1.7 million provided in 2012. This is mainly because the lender was able to write off more provisions for loan losses, but also because the company raised $17.5 million in selling off some of its loans held for sale.

Strategy

When it went public in late 2014, OnDeck Capital brought a unique business plan to a multi-billion dollar market that has been largely untapped by banks and other lenders. According to Oliver Wyman, a management consulting firm and business unit of Marsh & McLellan, there was an estimated $80 to $120 billion worth of unmet demand for small business lines of credit, with possibly even more for other credit-related products.

With this opportunity in mind, OnDeck came ready with a line of loan products that large banks couldn't offer to small businesses. For example, because OnDeck found that small businesses typically preferred smaller loans with shorter terms, it began offering unique loan products that ranged between $5,000 and $250,000 with term lengths of three to 24 months. To better evaluate a client's risk and get them faster financing, OnDeck developed cutting-edge technology based on the applicant's performance (rather than credit score), which allows an entire loan to be approved and completed in as little as one day.

Nearly eight years, $1.7 billion in loans made, and 4.4 million customer payments since it was founded, the company's top line business has grown considerably. From 2011 to 2013, OnDeck's loan originations grew at a compounded annual rate of 127%, with the company originating $458.9 million in 2013 alone. In 2014, the company enjoyed its best year of lending ever, with $788.3 million worth of loans originated in the first nine months alone.

Despite top-line business growth, the company has had two years of losses as it's spent heavy amounts of capital to gain a foothold in a market full of different lenders. While OnDeck may have more years of losses ahead as it continues to spend more on sales and marketing to grow its customer base, the company believes that these are investments that help will help spread awareness of its brand and carry the company toward profitability in the long-run. To ensure this happens, OnDeck plans to introduce new products, expand its loan offerings to more locations (beyond the US and its recent venture into Canada), better optimize its customer targeting, reduce the costs of attaining new customers, and increase its customers' lifetime value by better suiting their ongoing financial needs.

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Ondeck Asset Pool, LLC

1400 Broadway Fl 25
New York, NY 10018-5225
Phone: 1 (212) 876-8600

Stats

  • Employer Type: Public
  • Office Manager: Danica Dinoia
  • Renewals Sales Representative: Nate Mockaitis
  • Employees: 5

Major Office Locations

  • New York, NY