An important note to all veteran small business owners across America: the repayment terms of small business loans can vary greatly and are usually written in very small print. Just ask Air Force Veteran, Mike Dunn about his experience with one the many types of Ondeck Loans.
A proud Budget Blinds franchisee, Mike was already seeing business take off in Temple and Killeen, Texas. In fact, due to increased customer demand, he needed a location to both display and store inventory. Like many small business owners, he suddenly had a need for a working capital loan. His new mission was to quickly build a new showroom.
Mike started his research as many small business owners do; online, and came across the OnDeck blog. He filled out a survey on their website to match him with the right small business loan. The survey recommended an option and Mike called them.
He reviewed the terms of the suggested OnDeck loan carefully, and he even looked at OnDeck loan reviews.. Like most detail-oriented veterans, Mike wanted to ensure he maintained all protections for his scenario. When speaking with OnDeck, he specifically asked if he could pay the loan off early.
OnDeck Fees Reworded as a Discount
Mike stated that OnDeck assured him he could pay his loan off early but there would be a “25% prepayment discount.” Mike interpreted the “25% prepayment discount” thinking he would owe 25% of the loan’s remaining interest even if he paid it early. He admitted his interpretation was a mistake, but didn’t realize it until after he accepted the loan and OnDeck provided funding.
As many small business owners do, Mike soon realized the true cost of his loan was in the form of an Annual Percentage Rate (APR). Needless to say, Mike was looking for the “eject” button for his OnDeck loans because he had already come across a much less costly option.
But that was where the fine print of OnDeck fees kicked in
When Mike called OnDeck to obtain his payoff quote, OnDeck informed him that not only was his interpretation of the “prepayment discount” incorrect, the “25% prepayment discount” meant he actually owed 75% of the remaining interest regardless of how early he paid it off. He was stunned. This was definitely nothing like taking out a mortgage or car loan.
For any military veteran, the concept of payday lenders camping outside the base gate is not a new one. But seeing small business loans like this from a well-known lender, and being plugged by a Shark Tank shark feels… well a little like being thrown into an OnDeck shark tank and being attacked by a OnDeck loan shark. Or being treated badly by those same payday lenders.
The end of story is that OnDeck did not budge despite Mike appealing to them. Being a veteran certainly did not sway them. In fact, according to Mike, OnDeck said that his next loan “would be completely different.” Mike agreed and said, “Yes, different. Because it will not be from OnDeck.”
Understand Your Business Loan Rates (and Fees)
Unfortunately, practices like the pre-payment discount game are very common and not illegal. So, how does one protect oneself? A good place to start is the Small Business Owner’s Bill of Rights especially when looking at different OnDeck Loans. But that, itself, is not all encompassing. One must simply ask very detailed questions regarding pre-payment terms, balloon payments and extra fees. Click here to see a list of questions to ask before taking out a business loan. Always understand the apples-to-apples cost of a loan or APR. Download this resource to help you compare types of rates you may encounter from a lender. Download this resource to help you compare types of rates you may encounter from a lender.