Working Capital (Debt) Financing For Entrepreneurs: Mitch Jacobs, Founder And CEO, On Deck Capital (Part 3)

By guest authors Irina Patterson and Candice Arnold

Irina: How long do they need to be in business?

Mitch: We work with businesses that have typically been in businesses for several years. It’s not a program for startups. It’s a program for businesses that typically have $250,000 to $3 million in revenue and also businesses that tend to have a very high volume of small transactions but tend not have any collateral or hard assets as traditionally defined by a bank.

Irina: So, if I’m a business, roughly how long should I be in business before I can approach you?

Mitch: One year or more; however, again, I want to emphasize that what’s really important is that you have established a base of cash flow and that that cash flow is readily detectable by our system.

That means that you’re using online banking or payment processing or a product such as QuickBooks, all of which we’re able to extract information from very efficiently. As long as you’re using those tools as a business and you have revenue that on the low end would be $250,000 and on the high end, $2 million to $3 million.

By the way, those are the typical businesses we work with. We do have many businesses larger than that that we end up working with. I was giving you the typical range. Then, regardless what the collateral profile and the hard asset profile of your business is, even regardless of what the credit profile is, you have a very high degree of likelihood that you’d be able to get financing through the On Deck system.

Irina: On average, from all sources, how many businesses approach you each month for financing?

Mitch: At this point, it’s well over 1,000. It ranges between 1,000 and 2,000. It’s been growing quickly.

Irina: How many of those deserve a closer look?

Mitch: As we’ve been growing the business, we’re now starting to work with a higher and higher percentage of those businesses that use the On Deck system to set up their businesses to be able to access credit. So, don’t think of it as how many actually get funded by On Deck. At this point, somewhere around 30% of those customers will have an option to receive capital through On Deck, and then a significant number of the remainder will stay on our system to be able to access capital either through us or another provider over time.

Irina: Who are those partner providers?

Mitch: We haven’t announced that yet. That’s going to be coming up toward the end of this year.

I think that in any high-growth, technology-oriented company, as you get further and further into it, you start to realize how your tools and systems can serve a more expanded purpose.

For us, we started to realize that there are a lot of businesses that the initial credit model that was designed by On Deck to address a particular part of the market that was not being served by financial institutions, that there are actually other organizations and institutions that have created products and have an interest in reaching businesses.

And one of the things that we’ve built is far and away the most efficient platform for being able to integrate all of this information about a small business and to be able to analyze that information. That’s a value to many different lenders.

But, most important, it’s a value to the business owner. So, increasingly, we’re introducing new tools and services.

Our product and technology team is working around the clock on packaging the tools and the systems we’ve built and providing them to the business owners as a single system to help them manage their access to capital. None of these businesses has a professional finance organization. We’re giving them a part of that now through this software.

This segment is part 3 in the series : Working Capital (Debt) Financing For Entrepreneurs: Mitch Jacobs, Founder And CEO, On Deck Capital
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