$175 Million Transaction Underscores Company’s Leading Credit Risk Model, The OnDeck Score™
NEW YORK, April 30, 2014 /PRNewswire/ — OnDeck (www.ondeck.com), the technology-powered Main Street lender, announced today its inaugural securitization transaction, the first in the non-SBA direct business lending industry. The $175 million fixed rate notes are backed by OnDeck’s loan assets. The securitization, which was significantly oversubscribed, further diversifies OnDeck’s investor base with purchasers including insurance companies, mutual funds, money managers and various asset management firms.
The Class A was rated BBB investment grade, and the Class B was rated BB from DBRS, reflecting the predictability and quality of OnDeck’s small business loan cash flows and inherent industry and geographical diversification.
As a first-time issuer, the transaction marks a significant milestone for OnDeck and is a strong validation of the company’s performance and credit models. OnDeck was the first to issue a securitization in this asset class to a broad base of capital markets investors. Unlike most securitizations of consumer and commercial loan assets, or other business financing products such as equipment leases, this transaction was primarily influenced by the company’s proprietary business credit score — the OnDeck Score — that leverages big data explicitly as the determinant of risk for local businesses instead of relying on consumer credit scores. Through this model, the company has delivered over $1 billion to small businesses nationwide.
“Accessing the securitization market is another big step in executing OnDeck’s financing strategies. Through securitization, OnDeck further improves its financing terms while diversifying our investor base, which significantly benefits all key stakeholders in the business,” said Zhengyuan Lu, head of capital markets, OnDeck. “For our customers, this transaction will ultimately allow OnDeck to deliver lower cost solutions to Main Street.”
Securitization of the company’s loans was driven by OnDeck’s significant growth and the company’s goal to further expand its funding sources. The strong investor demand and oversubscription for the securitization is confirmation that OnDeck has pioneered a new asset class in short term working capital that is much needed by small businesses.
Deutsche Bank served as the structuring and placement agent for the transaction.
“This transaction marks yet another first-mover milestone for OnDeck within the direct business lending industry,” said Howard Katzenberg, chief financial officer, OnDeck. “Tapping the securitization market will bolster the company’s financials and provide a scalable source of capital for OnDeck in the future.”
Launched in 2007, OnDeck uses data aggregation and electronic payment technology to evaluate the financial health of small and medium sized businesses and efficiently deliver capital to a market underserved by banks. Through the OnDeck platform, millions of small businesses can obtain affordable loans with a fraction of the time and effort that it takes through traditional channels. The company’s proprietary credit models look deeper into the health of businesses, focusing on overall business performance, rather than the owner’s personal credit history. The OnDeck system also provides a critically needed mechanism for financial institutions and other business service providers to efficiently reach the Main Street small business market.
OnDeck has deployed more than $1 billion in capital to tens of thousands of businesses across approximately 700 different industries. The company grew 150% in 2013, and was recently named #11 on Forbes’ 100 Most Promising Companies in America list and was listed on the Inc. 500/5000 for a second year in a row. The company also has earned an A+ rating with the Better Business Bureau. OnDeck is financed by some of the nation’s leading venture capital firms, including Google Ventures, SAP Ventures, RRE Ventures, Institutional Venture Partners and Tiger Global.
Jonathan Cutler/Melissa Barto
JCUTLER media group