APPROACH AND METHODOLOGY
On Deck's platform is dedicated to both increasing the access and the availability of capital for Main Street and Micro businesses. On Deck provides a complete cloud-based financing solution - from underwriting, to funding, to servicing - for Main Street business owners as well as the commercial banks and community lenders who want to serve them. The On Deck platform provides a scalable infrastructure that not only accurately predicts the creditworthiness of Main Street &Micro-businesses, but also takes the cost-prohibitive nature out of the underwriting process for banks and the lengthy time commitment for small business owners.
As On Deck continues its mission of using technology to increase the availability of capital, the company is committed to work with five major financial institutions to increase access of working capital to Main Street businesses. The financial institutions On Deck seeks to partner with are those banks that lack an efficient infrastructure to efficiently and effectively deploy capital to Main Street businesses. The On Deck management team and board members will leverage both business and personal relationships to source these partnerships.
The free structure with partnering banks will be flexible; it can be fixed or variable depending on partner preference.
On Deck has partnered with the Association for Enterprise Opportunity. This iniative directly aligns with the assocation's 'One in Three Campaign,' and On Deck antitcipates its technology platform will help to further both organizations' goals of bringing this new financial infrastructure to 1 million Main Street businesses nationwide. AEO is providing local presence via its relationship with Community Development Financial Institutions (CDFI's). CDFIs will fund the loan (consumer interfacing), while On Deck will provide the product. AEO will also help with recuitment of banking partners and marketing of the effort within the pilot.
IMPLEMENTATION, TIMELINE, AND DELIVERABLES
On Deck is engaging in a constant dialogue with several financial institutions and organizations in an effort to form partnerships where our platform technology can be utilized to increase Main Street's access to capital. On Deck estimates that forming official partnerships with five institutions will result in more than $100 million in capital delivered to Main Street & Micro-businesses nationwide, which will subsequently result in the creation of 9,000 new jobs. (Based on our current discussions, we believe 2,000 small businesses per bank is a satisfactory estimate for volume. Therefore, that will require $20 million of capital per bank.)
To solidify On Deck's commitment to this initiative, On Deck has built this into its strategic plan for 2011 and 2012 (which has been approved by On Deck's Board of Directors) and created anoperating division dedicated to making its proprietary,web platform technology available to financial institutions and other organizations interested in serving the Main Street market. On Deck recently hiredJames Hobson to lead this division as Senior Vice President of Strategic Partnerships & Platform Solutions. His career spans a wide array of leadership experience in the consulting, telecommunications and financial services sector. On Deck also staffed a team of several employees who directly report to James to further his efforts.
On Deck estimates this initiative will take approximately three years. The initial pilot with the first bank is expected to be in place in the fourth quarter of 2011. On Deck then plans to add a second and third bank by the end of 2012, and two additional ones in 2013.
For the past 40 years small businesses have had a hard time borrowing from banks. In fairness to the banks this is because the transaction cost of making these small loans is too high, leaving very little return for the bank once the loan has been made.' - President Bill Clinton, 2011 CGI America
'The On Deck platform eliminates the high cost of doing business with Main Street by automating the expensive process of collecting real financial data from even the tiniest of commercial enterprises.' -Mitch Jacobs, Founder, On Deck Capital, Milken Global Forum, April 2010.
Main Street and Micro-businesses face many obstacles in accessing the capital they need to grow from traditional banks. Business owners themselves often lack the time or expertise required to complete the complicated traditional loan process. Furthermore, the problem for traditional banks lies squarely in a lack of an efficient and cost-effective infrastructure to underwrite small business loans. The data that is commonly utilized to evaluate this segment -the personal credit score-does not give an accurate perspective on the creditworthiness of a business. Judging a business using the personal credit score of the business owner is highly inaccurate and results in a significant number of healthy small businesses unable to receive capital. On Deck has proven that when the personal credit score is utilized as the main indicator of creditworthiness, the loss rates are greater than focusing on true financial health of the business.
As the Small Business Administration indicated in its FY2010 report, Main Street and Micro-businesses nationwide are responsible for the majority of new private sector jobs, leaving little doubt that they are the predominate engine for America's economic growth. This same report also indicates that small business have '
found it difficult to access financing' to survive and grow. Furthermore, in the same report the SBA argues that '
improving access to credit by small businesses is a crucial step in supporting economic recovery and job creation.' According to industry general benchmarks, every $30,000 of capital connected to small businesses results in the creation of one new job. To this end, On Deck believes that by efficiently and accurately connecting banks to qualifying Main Street and Micro-businesses, the platform technology will serve as a vehicle for future job creation.
SEEKING: Implementing Partners, Best Practice Information, Media/Marketing Opportunities
On Deck seeks to partner with financial institutions and other organizations interested in serving the Main Street market in a more cost-effective manner.
OFFERING: Financial Resources
On Deck's platform technology offers a high value proposition for financial instutionts seeking to increase lending capaity and effiency to Main Street busineses.