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Providing Loans Based on Cash Flow – Not Credit Score

May 6, 2010

With the recession having left many banks reluctant to lend, small businesses have struggled to find other sources of credit. One intriguing alternative is On Deck Capital, which promises to revolutionize lending to small businesses.

Traditional banks, says Mitch Jacobs, On Deck’s founder and chief executive, know so little about their small-business borrowers that it scares them off. On Deck, by contrast, says it scours “the cloud” for the vast information trail that every business now leaves to develop a clear understanding of a potential client’s creditworthiness. It seeks businesses with positive cash flow, ideally from a lot of small-ticket transactions.

It takes no collateral, and — here’s the biggest difference between On Deck and traditional lenders — the loan is repaid automatically with daily deductions from the borrower’s bank account.

Read the Fulll Article