Getting a Small Business Loan When the Bank Says No

"Time is valuable. They can't step away from their businesses and then wait a month to get approved," he says. "What we've learned is that convenience and speed and this idea of business owners being in control of the process" is appealing to applicants.

The other trend the company is seeing involves the types of projects for which business owners are using the funds, indicative of the economy.

"Business owners are taking on new projects and making investments, but they're smaller and shorter term than these long five-to-seven year investments," Breslow says. "Instead of someone saying 'I want to open a new location,' they might be using the money to hire workers at current locations."

One recent happy customer of On Deck is Travis Clark, owner of a Foot Solutions franchise in Grove City, Ohio. Foot Solutions fits and sells proper footwear, orthotics and custom arch supports to customers with foot, knee and back pain.

Clark opened his store a year and a half ago. He claims his personal bank PNC Financial Services(PNC) wouldn't even look at his application because he hadn't been in business for at least three years. A PNC spokesperson could not be immediately reached for comment.

"I had to resort elsewhere," Clark says. "I found On Deck online and I contacted them and it's been a pretty smooth process since we started."

Clark says he worked with an On Deck representative over the phone and within five days he had a $20,000 loan.

"Since we're such a seasonal business we used it for inventory purchases. We have to do new purchases each season especially in Ohio," Clark says, adding that he would "absolutely" use On Deck again if needed.

"The process is pretty straightforward, they don't judge up front like a lot of the banks are going to do," he says.

Defaults are roughly 5% of On Deck Capital's portfolio. On Deck doesn't make public its approval vs. rejection rate of applications, but Breslow emphasized that the company is providing access to capital for many businesses that can't get bank loans.

The system's automated payment system helps keep tabs on what's happening at the businesses quicker than a bank's portfolio. Businesses have two choices on how to pay back loans. They can either choose fixed, daily micro-payments, drawn from their operating business account. Or they can choose a split funding option, which On Deck launched in April.