OnDeck Achieves First Non-SBA Lending Securitization
OnDeck, the technology-powered Main Street lender, announced 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, 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.
Deutsche Bank served as the structuring and placement agent for the transaction.
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. OnDeck has deployed more than $1 billion in capital to tens of thousands of businesses across approximately 700 different industries.