By Lydia Beyoud | December 19, 2018 10:26AM ET
Online small business lender OnDeck Capital plans to launch an equipment finance loan business in early 2019, applying its algorithmic know-how to the $35 billion market.
OnDeck would become one of the first financial technology companies to enter the market, and the move could help it differentiate its business from a growing pool of fintech competitors in online small business lending.
OnDeck uses an algorithmic underwriting process to offer loans to small businesses that are often neglected by traditional financial institutions. The technology hasn’t penetrated the equipment finance market in the same way, OnDeck CEO Noah Breslow said in a Dec. 19 press release.
“We believe OnDeck’s technology is primed to revolutionize how small businesses finance their equipment needs,” Breslow said.
Banks, manufacturers and vendors provided the bulk of equipment financing in 2015, according to the Equipment Leasing and Finance Association. Independent finance companies was just 16% of the market, the trade group said.
The small-ticket segment OnDeck is entering — for equipment loans under $250,000 — makes up about one third of $1 trillion of loans issued each year in the industry, the group said.
OnDeck projects its loans could fund medical, manufacturing, construction and office equipment purchases. The secured, fixed-rate loans will range from $5,000 to $100,000, payable over 2-year to 5-year terms, and will initially be available to OnDeck’s current customers in the U.S.
The new financing option may help OnDeck retain existing customers and hold loans on its books for longer periods.
The company used a pilot referral program earlier in 2018 to gauge customer interest in equipment financing. In 2019, OnDeck will begin originating the loans and holding them on its balance sheet.
To read the article on Bloomberg, click here