RE: U.S. TREASURY DEPARTMENT REQUEST FOR INFORMATION ON ONLINE MARKETPLACE LENDING AND EXPANDING SMALL BUSINESS ACCESS TO CAPITAL TREAS-DO

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1 SEPTEMBER 30, 2015 SUBMITTED ELECTRONICALLY Ms. Laura Temel U.S. Department of the Treasury 1500 Pennsylvania Avenue N.W., Room 1325 Washington, D.C RE: U.S. TREASURY DEPARTMENT REQUEST FOR INFORMATION ON ONLINE MARKETPLACE LENDING AND EXPANDING SMALL BUSINESS ACCESS TO CAPITAL TREAS-DO Dear Ms. Temel: Thank you for the opportunity to provide comments to the U.S. Treasury Department (the Department ) on its Marketplace Lending Request for Information (the RFI ). We appreciate the Department s interest in learning more about how lending and technology innovation are helping America s Main Street small businesses grow and thrive, and the Department s focus on helping to facilitate the responsible growth of our space. At OnDeck, we are committed to transforming how small businesses access capital and are excited to tell our story. About OnDeck We are 100% focused on small business and increasing Main Street s access to capital. Our mission is to responsibly and efficiently get credit into the hands of small business owners so that they can grow their businesses, hire workers, and fuel the local economy. Through technology, automation, and data analytics, we are able to underwrite a small business customer in minutes, and provide funding in potentially less than 24 hours. To date, OnDeck has provided more than $3 billion to American small businesses, and the first $1 billion that we lent was estimated in a third-party economic impact report to have generated more than $3.4 billion of economic activity and the creation of 22,000 jobs. 1 The report also found that the three most common uses of OnDeck credit were for the purchase of inventory, employee hiring and retention, and the acquisition of new business equipment. 2 Our small business customers come from over 700 different industries, many of which are frequently overlooked or excluded by traditional lenders, and include restaurants, retailers, florists, automotive shops, bakeries, and doctor and dentist offices. For the 2014 calendar year, our customers had a median of $569,000 in annual revenue (with 90% of our customers having annual revenue between $150,000 and $3.2 million) and had been in business for a median of 7.5 years (with 90% in business between 2 and 31 years). Our customer feedback and satisfaction scores rival those of some of America s most popular brands and our A+ Better Business Bureau rating underscores our commitment to meeting the 1 Analysis Group, OnDeck Economic Impact Report (2014). 2 Ibid. (based on responses to the survey conducted for the report). 1

2 highest standards of service excellence. 3 Marking the growth and maturation of our company, we were proud to go public on the NYSE at the end of We believe that small businesses deserve access to fair, efficient, and transparent financing solutions. Earlier this year, we published our OnDeck Core Principles, 4 which set forth our commitments to our customers to ensure that we are able to responsibly expand access to capital for millions of small businesses. As OnDeck scales and is able to access capital itself on better terms, we have been able to share savings with our customers, as demonstrated by nine-consecutive quarters of declines in the weighted average rates we charge our customers. OnDeck remains committed to building a sustainable small business lending model that does not require public subsidy or support and that responsibly shares scale, efficiency, and cost-savings with our customers. As we acknowledge in our Core Principles, we succeed when our small business customers succeed, and we remain committed to doing everything we can to advance our shared interest. Small Business Credit Needs (RFI Question 4 see also OnDeck Technology below) It is well known that since the financial crisis, commercial lending activity to small businesses has not recovered to pre-crisis levels, and overall small business lending has been in a state of secular decline. This is due at least in part to the risky nature of small business lending and increased risk aversion at traditional banks. 5 Since 2008, small business loans on the balance sheets of banks are down approximately 20 percent, 6 and only 36% of small businesses indicated that they were able to get all of the financing that they sought when they applied for credit in the first half of Compounding the problem is the fact that the cost of traditional underwriting models challenges the economic viability of smaller-sized and shorter-term loans: one recent HBS paper authored by former Administrator of the U.S. Small Business Administration (SBA), Karen Mills, noted that [t]ransaction costs to process a $100,000 loan are comparable to a $1 million loan, but with less profit. 8 These dynamics have fueled a product mismatch problem and credit gap when a small business is looking for a smaller loan to satisfy short-term needs; moreover, absent the availability of shorter-term loan products, many small businesses are unable to secure longerterm financing because of their potentially higher credit risk. OnDeck is solving this problem and filling a market gap by providing credit products that fall between business credit cards and traditional long-term bank loans. Credit cards are good for 3 For more information on our small business customer stories and testimonials, please visit You can also find OnDeck small business customer case studies included here in Appendix A. 4 OnDeck Core Principles (last updated March 30, 2015), available at and included here in Appendix B. 5 [S]mall business loans... are inherently riskier than consumer and large business lending. Karen Gordon Mills and Brayden McCarthy, The State of Small Business Lending: Credit Access during the Recovery and How Technology May Change the Game, Harvard Business School, Working Paper (July 22, 2014), at 5, available at 6 Ibid. at 4. 7 Federal Reserve Joint Small Business Credit Survey Report (2014), at 14, available at 8 See Mills at 6. 2

3 smaller day-to-day expenses, including travel and business meals, but typically do not provide an adequate solution for a business looking, for example, to purchase inventory, hire workers, or invest in large marketing campaigns. Long-term bank loans are generally more appropriate for relatively infrequent or longer-term use cases, such as buying out a partner or another business, engaging in a significant real estate transaction, or purchasing heavy machinery. OnDeck business loans and lines of credit therefore provide business owners with needed growth capital for appropriate short-term investments. As noted in the section on business partnerships below, banks, including BBVA Compass, have chosen to partner with us in order to help business customers access short-term capital for projects that they would otherwise not have been able to finance from the bank in the past. 9 Small businesses frequently opt for OnDeck s shorter-term credit products (e.g., 3-24 month loans) when they are: 1. Presented with key growth opportunities; 2. Looking to avoid the opportunity cost of long (and uncertain) searches for capital; Unable to access longer-term financing due to credit risk; and/or 4. Are seeking to avoid the cost commitments of long-term financing (which may exceed the total cost of an OnDeck loan). With respect to loan cost, by matching a loan s term with the estimated investment payback (or ROI) period, a small business can minimize total overall interest expense. For example, a loan used to purchase inventory can have a payback term that corresponds to the expected sale of the inventory -- in this way, a borrower may pay less in total interest expense on a higher-rate, short-term loan than on a lower-rate, long-term loan (which may take weeks or months to procure). The following table helps to illustrate this dynamic: LOAN SIZE: $50,000 Duration Total Interest Expense Total Payment Annualized Interest Rate 6-month loan $8,000 $58,000 60% 24-month loan $21,000 $71,000 36% Difference -$13,000 -$13,000 24% Note: the above example calculations are rounded for simplicity and highlight that a two-year, lower-apr, monthly payback loan can cost significantly more in total interest expense than a 6-month, higher-apr, daily payback loan. 9 Mary Wisniewski, Why BBVA Compass Is Sending Customers to an Online Rival, American Banker (May 8, 2014) ("We see [OnDeck] as good allies. They allow us to satisfy a need," says Lonnie Hayes, small business segment director for BBVA Compass. "It allows us to say yes to entrepreneurs more."), available at html. 10 The Federal Reserve Bank of New York recently found that the average small business owner spends 33 hours pursuing capital from traditional sources, and often without success. Federal Reserve Bank of New York (2014), available at See also Scott Shane, Why Small Businesses Are Turning To Online Lenders, Entrepreneur (April 15, 2015), available at 3

4 Importantly, the structure of OnDeck loan products also expands access to capital and promotes financial inclusion by providing small businesses with credit they may otherwise be unable to secure. Because approximately half of all small businesses in America either fail or close their doors within their first five years, 11 it should not be surprising that many lenders have very narrow credit boxes when looking to approve a small business for a traditional, long-term loan. By offering loans with shorter terms, thereby decreasing credit risk, OnDeck is able to provide capital to otherwise non-bankable small businesses. We further reduce credit risk and help small business owners smooth their cash flows by structuring loan repayments to be made on a daily or weekly basis in this way, businesses are not faced with yet another monthly expense that comes due at the same time as other large expenses, potentially including commercial rent and payroll. 12 Notably, our small business customers can build their business credit scores through our reporting of consistent repayment of their loans and can then avail themselves of a virtuous cycle of potentially improved terms on subsequent credit products. 13 With respect to virtuous cycles and helping our customers grow, OnDeck is constantly working to provide small businesses with improved risk-based pricing, extended loyalty benefits, and a broader suite of available credit offerings. Just this month, in partnership with Intuit, we announced a new line of credit product with an APR ranging from 8.9% to 19.9%, and we are developing a comparable-rate extended term-loan product for select small business customers. Ultimately, OnDeck is seeking to offer Main Street small businesses with a range of credit products that serve a business need or use case at various stages of development. Demonstrated by the more than $3 billion we have lent to date, we are working hard to serve as Main Street s trusted partner. 11 United States Department of Labor, Bureau of Labor Statistics, Chart 3 Survival Rates of Establishments, available at 12 See Oliver Wyman, Financing Small Businesses, How New Form Lending Will Reshape Banks Small Business Strategies (2013), at 5 (noting that that the use of a daily remittance model helps smooth the cash flow impact of the new loan for the [small business]; after all, monthly remittance introduces yet another source of cashflow lumpiness ), available at wyman/global/en/files/archive/2013/financing-small-businesses-how-new-form-lending-will-reshape-banks- Small-Business-Strategies.pdf. 13 Data shows that, on loans from two of our major channels in 2013, businesses that took at least three OnDeck business loans on average grew their revenue by 25% and their bank balances by 42% between their 1st and 3rd loans. 4

5 The OnDeck Model As noted above, OnDeck relies on credit and technology innovation to power our lending activity. It is estimated that there is $80-$120 billion in unmet demand for small business lines of credit, 14 but traditional lending models lack the efficiency and standardization of underwriting processes to effectively serve that demand. The combination of a time-consuming offline application process, lender over-reliance on personal credit scores, a product mismatch around intended use cases, and rigid collateral requirements has resulted in frustration for many small businesses pursuing traditional credit. OnDeck is solving these market gaps by deploying our 5 th generation proprietary credit underwriting model to assess more than 2,000 data points per application and potentially approve and fund a business applicant as fast as the same day. The OnDeck Score provides enhanced predictive credit risk assessment and allows for underwriting standardization across more than 700 small business industries. Our rigorous data-driven underwriting model assesses a borrower s ability-to-repay and has yielded consistent portfolio performance with a lifetime cumulative net charge-off ratio generally between 6-7%. Financing Platform (RFI Questions 1, 10, and 12) OnDeck relies on a carefully diversified financing platform to originate small business loans. We have large bank facilities with leading national banks, including Bank of America and SunTrust, in place, which allow OnDeck to originate and hold the majority of our loans on our balance sheet. We retain the first loss position in all of our bank facilities. This approach ensures we retain risk around our lending activities, have an inherent interest in offering responsible and sustainable credit products, and are as interested in the success of our small business customers as our customers are in their own success. Earlier last year, OnDeck completed the first non-sba, investment-grade rated small business loan securitization by an online lender in which we retained a 5% first loss risk position if the loan is not repaid; our understanding is that Dodd-Frank s risk retention rules would require such skin in the game in asset-backed securitization sales beginning in We also finance our lending activity through OnDeck Marketplace, a platform which enables us to sell whole loans to sophisticated institutional investors. For the second quarter of 2015, approximately 34% of our term loan originations were sold through Marketplace. We do not sell our loans to retail investors, and we do not fractionalize our loans. We anticipate continuing to grow Marketplace in the near-term with a target of selling between 35-40% of our term loans to our institutional investors. Ultimately, we will continue to pursue thoughtful diversification of our financing platform in an effort to increase flexibility, reduce costs, and share these related benefits with our small business customers. 14 See Oliver Wyman at 6. 5

6 Distribution Channels (RFI Question 5 see also OnDeck Business and Community Partnerships below) With respect to how we reach our small business customers, we have been actively growing our direct and strategic partner distribution channels (for example, banks, technology companies, and small business servicing companies). In the second quarter of 2015, 79% of our loans were originated through our direct contact with the small business borrower or through one of our strategic partners (discussed in more detail in the next section). Only 21% of our loan originations in the quarter came from our Funding Advisor/broker program, in which we have instituted a re-designed and industry-leading due diligence and on-boarding program to help ensure our high standards are met. Our direct marketing efforts include our internal sales team, national television, radio, and direct mailing campaigns, as well as our investment in a heavy digital presence. Our focus on brand awareness and direct marketing is ultimately intended to reduce customer acquisition costs in the long run, and establish OnDeck as the trusted source of capital for small businesses. Overall, the OnDeck model is built to ensure that we can efficiently, responsibly, and sustainably serve America s Main Street small businesses through various credit cycles and economic environments. We remain committed to accurately pricing risk and sharing cost savings with our customers as our scale, efficiency, and predictive analytic advantages continue to develop. OnDeck Business and Community Partnerships (RFI Question 5) As noted above, OnDeck is building and deepening our strategic partnerships with a range of world-class financial institutions, technology companies, community and nonprofit organizations, and small business service providers. These partnerships leverage OnDeck s underwriting, origination, and servicing technology in order to efficiently reach and serve tens-of-thousands of small businesses. For example, through partnerships with Intuit, Prosper, Angie s List, BBVA Compass Bank, and TSYS, we are able to combine robust small business customer networks and data with our leading predictive analytics platform in order to provide key credit solutions. Our strategic partner channel has the further benefit of reducing the cost of acquiring customers, which can subsequently drive lower-costs for the related loan products. Demonstrating the value partnerships can provide to small businesses, we recently announced a new $100 million small business lending fund with our strategic partner, Intuit. This program builds off of our existing partnership, which has provided term loans through the QuickBooks Financing platform since The new QuickBooks Financing Line of Credit product deployed through the lending fund will be powered by Intuit s customer data and leverage OnDeck s industry leading technology. It is designed to offer a better financing experience, with instant credit decisions, for established small businesses with strong credit. As noted above, rates on the credit lines will range between 8.9% to 19.9% APR. OnDeck is also proud to be the technology partner of TILT Forward, an initiative of the Association for Enterprise Opportunity (AEO). TILT Forward is dedicated to increasing financial inclusion and equipping CDFIs and other community and nonprofit lenders with innovative loan products and services so that they can help more small businesses in their communities. 6

7 OnDeck s proprietary technology platform helps these lenders efficiently identify creditworthy small businesses that have long been overlooked by mainstream methods. In doing so, OnDeck is extending its leading data analytics and loan process automation to participating missionfocused lenders across the United States. To date, powered by OnDeck, the TILT Forward Initiative community lenders have originated approximately $1.5 million for CDFI small business customers, and we are expecting the next phase of the initiative, which will increase the number of participating community lenders, to lend up to $10 million to small businesses across the country. 15 We look forward to continuing to scale this innovative model, including with a new decline referral program, along with our CDFI partners, thereby allowing them the opportunity to have an even greater impact on businesses in their community through guidance and technical assistance programs. We are also proud partners of SCORE, a non-profit organization comprised of 11,000+ volunteer mentors who provide free and confidential small business mentoring and advice. As the sponsor of SCORE s Financing Center for Excellence on OnDeck provides any small business owner who applies to OnDeck with special access to mentoring and advice from SCORE via a dedicated online experience. We also work closely with SCORE s 320 nationwide chapters to equip their mentors with custom-built educational tools focused on the rapidly evolving small business lending industry. Our commitment to SCORE and small business credit education is further underscored by our launch earlier this year of our platform, a first-of-its-kind resource solely dedicated to explaining business financing. The need for this platform was made abundantly clear to us based on a survey we conducted that found that a majority of business owners believe that they lack a comprehensive resource to learn about their financing options; notably, 87% concluded that they had not found an online resource to answer their business financing questions. 16 Ultimately, we are excited that the OnDeck model provides many opportunities to strategically partner with leading organizations focused on serving American small businesses. OnDeck Technology (RFI Questions 2-4, 6) As discussed above, OnDeck s technology platform is powered by our proprietary 5 th generation underwriting model that can generate a standardized OnDeck Score for small business applicants across more than 700 different industries. The automated model pulls from more than 100 external data sources, and analyzes more than 2,000 data points per application. One of the key insights that drives OnDeck s credit assessment of an applicant is that the small business owner s personal FICO score should not be the primary factor used to determine the health and creditworthiness of the small business. Many successful small business owners may have weak personal credit scores due to the financial pressures of starting and growing their businesses. By incorporating appropriate transactional data, public records, credit data, 15 See OnDeck Press Release (Sept. 29, 2015), available at 16 See OnDeck Press Release (Feb ), available at 7

8 % of Defaults Eliminated proprietary business data, social data, and accounting data, the OnDeck model is able to confidently unlock capital access for many small businesses that may be declined by traditional underwriting models or products that rely on a personal credit score alone. More specifically, the following graph depicts how the OnDeck model is more accurate than a personal credit score in predicting bad credit risk, and allows us to fund double the number of loans as a personal credit score at the same level of risk: 100% 90% 10% 0% 100% 40% 20% 10% 0% Acceptance Rate (%) The OnDeck Score Personal Credit Score Random When it comes to technology, it is important to underscore that OnDeck takes data security and privacy very seriously. OnDeck is committed to providing transparent disclosure of how applicant/borrower information is collected and used, and to protecting such information. OnDeck has received TRUSTe s Privacy Seal, signifying that our Privacy Policy and our practices have been reviewed for compliance with the TRUSTe program. A TRUSTe certified website is one that satisfies key data privacy and protection principles. With respect to data security, our dedicated IT security team deploys TLS 128-bit secure communication and continuously works to enhance our security practices and address potential security vulnerabilities. Legal and Regulatory Landscape (RFI Questions 7-8) As a publicly-traded company and an online commercial lender, OnDeck is subject to a broad range of federal and state legal and regulatory requirements. Commercial lenders must satisfy an overlay of federal law, and then ensure compliance with state commercial lending requirements on a state-by-state basis. At the federal level, we are regulated by the SEC and subject to US securities laws. We further satisfy applicable lending requirements under, among others, the Fair Credit Reporting Act, the Servicemembers Civil Relief Act, the Equal Credit Opportunity Act, and sanctions programs administered by the Office of Foreign Assets Control (OFAC). It is important to underscore that OnDeck is committed to full compliance with all fair lending requirements, and does not use data around protected categories to inform credit scoring. We also satisfy relevant requirements under other important federal laws, such as the Anti-Money Laundering (AML) and Collections laws. 8

9 At the state level, we constantly monitor and comply with all legal commercial lending requirements on a state-by-state basis. We are a direct lender in a substantial majority of states, but do partner with a bank sponsor in some states. Compliance with our legal requirements is paramount. Our Compliance program is led by a 30- year financial services veteran, and is implemented through a strong tone at the top and effective and continuously improving internal processes. This is not only an OnDeck imperative, but is expected by our banking partners, whether they participate through our credit facilities, as a Marketplace participant, or as a credit sponsor. Policy Considerations (RFI Questions 9, 11 and 14) As noted above, marketplace lenders are subject to significant regulatory and compliance requirements focused on market and borrower protections. The current environment for commercial lenders is conducive to continued innovation and development of lending models and products that, as provided herein, help to serve critical business needs and use cases. It would be premature and potentially harmful to small business owners if additional regulation were imposed to codify particular lending models or credit products at this early-stage of industry development. That said, we remain committed to complying with existing regulation, driving industry bestpractices and self-regulatory frameworks, along with other responsible lenders in our space. Our OnDeck Core Principles establish a baseline of key practices that ensure that small business owners can access capital in a fair, efficient, and transparent manner. Our model is predicated on the customer experience, which drives our focus on borrower-centric policies and practices. At OnDeck, we understand that transparency requires that a small business owner can make an informed decision about a credit product. To this end, we provide our customers with a robust set of loan pricing and comparison tools that empower a business owner to assess whether a credit product is a proper fit for a given business need or use case. 17 We ultimately believe it is right for policymakers to learn more about our space and study market developments, especially with respect to learning more about the credit demands of Main Street small businesses. We urge caution, however, in imposing new regulatory requirements that prematurely codify particular commercial lending models or products. There are also a number of positive steps policymakers can take to help support the development of Marketplace lending and the expansion of capital access for small businesses, including: 17 For example, our disclosures provide our customers with a number of key terms and pricing metrics, including the total loan cost, the total repayment amount, the total interest cost, the total interest percentage, the periodic payment amount, the cents-on-the-dollar loan cost, and the interest expense multiplier (or factor rate). We are wary of applying an annualized interest rate on short-term loans, because as the United Kingdom s Financial Conduct Authority (the FCA) has broadly recognized: Short term loans tend to have high APRs because the costs are high relative to the amount borrowed and the duration of the loan even if the actual cost to the consumer is less than for a longer term loan with a lower APR (emphasis added)... it is [therefore] not easy to compare loans of different size and length [using APR]. FCA Consulting Paper CP 14/10 (July 2014). Note that while the FCA s analysis was included in the very distinct context of consumer lending, the general principles discussed around the APR pricing metric can be applied to any short-term lending context. 9

10 Support Bank Referrals and Partnerships Because the majority of small business loan applications ($1MM or less) are unmet or declined by banks, 18 small businesses would benefit significantly from a robust referral and partnership network between traditional financial institutions and online lenders. Not only would small businesses benefit by being provided with more credit options, but it is likely that overall online loan pricing would further decrease given the benefits of increase scale and reduced customer acquisition costs. The UK government has recognized the significant benefit this will provide to small businesses and has accordingly implemented measures to increase decline referrals. 19 We encourage US policymakers to consider ways even through public statements to support the development of referral and partnership networks in this country. Support Government and Technology Platform Initiatives US policymakers should support a broad range of beneficial initiatives, including around data access and lending/grant programs. With respect to data, the US government has access to a range of small business data (e.g. at the IRS) and can also help facilitate greater access to customer bank data through the formulation of principles that can guide evolving open data standards. These principles should be guided by the values of efficient access, customer choice, and a competitive marketplace. By helping to unlock fair and equal lender access to data, subject to the permission of the small business customer, the government can facilitate enhanced small business services and capital access, as well as support fraud detection and prevention efforts. A similar initiative is already underway in the UK. 20 There are also a range of government lending and grant programs that could benefit from partnerships with technology platforms. For example, platforms like OnDeck are able to rely on big-data analytics and automation to streamline small business verification and fraud prevention processes. OnDeck is also able to deploy funds in hours. Given these core strengths, one can imagine how such capabilities could help, for example, government agencies deploy funds to small businesses in the aftermath of natural disasters or emergencies. Support for partnerships between the government and technology platforms could significantly benefit affected small businesses by deploying funds effectively and efficiently. Support Regulatory Harmonization As described above in the section on the Legal and Regulatory Landscape, Marketplace lenders are subject to a complex web of federal and state laws. Unfortunately, the existing landscape was created at a time that did not contemplate our modern Internet economy, and therefore includes a number of archaic inefficiencies. Policymakers should consider creating cross-agency, federal and state, FinTech working groups that can engage with industry to help to streamline and harmonize existing 18 The New York Fed Joint Small Business Survey (2014) found that more than half of loan applications for $1 million or less go unmet, and that most small businesses applications are to banks. 19 See Matt Scuffham, UK scheme to promote alternative lenders to be running by 2016, Reuters (March 24, 2015), available at 20 UK Call for evidence on data sharing and open data in banking (March 19, 2015), available at 10

11 regulatory frameworks in order to promote the efficient and responsible development of this space. The OnDeck Team At OnDeck, we are committed to attracting and retaining the best team of professionals in the industry. We believe that the values of OnDeck ingenuity, impact, passion, and openness must first be reflected in the way we attract and develop our internal team. By retaining leading talent that embody our values and are anchored in a culture of integrity, we are able to ensure service excellence for our small business customers. The OnDeck management team and our Board of Directors have deep experience in technology and small business. They understand what it takes to serve small businesses as well as keep ahead of the constantly evolving small business landscape. The strength of our leadership is also evident in the strength of the company s employees, who are dedicated to driving our business and maximizing small business growth by continually finding solutions to serve our customers even better. We are experts in technology and small business, and we share a singular focus: fostering small business growth. As of June 30, 2015, the OnDeck team comprised more than 550 employees across our US offices in New York, Virginia, and Colorado, marking significant growth from the 369 employees we had at the end of September Moreover, at the time of our December 2014 initial public offering, we had approximately 100 technology and analytics personnel, and since that time have continued to make substantial financial and personnel investments in that area. Additionally, OnDeck is excited to be expanding internationally, and we are building local teams in Canada and Australia in order to better serve our small business customers there. Our expansion will be marked by our commitment to bring together best practices and customer service excellence across our operations in the United States and abroad. OnDeck s commitment to its employees is also reflected in the public recognition and awards we have received. We are proud, for example, to have been named: Crain s Best Places to Work in NYC ( ); SHRM Colorado Best Companies to Work For (2015); FORTUNE/Great Places to Work Great Rated People Picks: 20 Great Workplaces in Financial Services (2015); and 100 Best Workplaces for Millennials by FORTUNE.com and Great Place to Work (2015). And as a result of the quality of our team, we have received a number of company awards, including being ranked among: Inc. 500/5000 ( ); Crain s Fast 50 ( ); and Forbes America s Most Promising Companies ( ). * * * 11

12 We thank you again for providing us with this opportunity to share more about who we are at OnDeck and how we are transforming small business lending. We look forward to serving as a resource for -- and working with -- policymakers to help steer the development and ongoing maturation of our space. Sincerely, Noah Breslow CEO and Chairman of the Board Daniel S. Gorfine Vice President, External Affairs 12

13 EXHIBIT A OnDeck Small Business Customer Case Studies 13

14 Rachel Bollin - B&N Laundry Murrieta, CA "I can t explain how easy the loan process was. I waited nearly 6 months for my SBA loan to go through. It took less than 48 hours to have my loan from OnDeck. They totally understood the issues we small business owners have." The Problem Rachel Bollin, owner of B&N Laundry in Murrieta, CA has an allnatural and chemical-free laundry soaps and laundry supply business. Rachel needed additional capital to help fill her first purchase order from a major retail chain. The Solution In June 2015, Rachel started the search for financing outside her small SBA loan. She was introduced to OnDeck though Intuit Quickbooks. Rachel's application took just a few minutes and she was funded in two business days. The Result By the Numbers 2 years in business 2 days $26K 1 time to funding total borrowed major purchase order filled With the funds from OnDeck, Rachel was able purchase inventory to fill the biggest order she ever had. Once she was paid from her customer, she was able to purchase equipment that she can use to fill larger orders. As she continues to grow, Rachel also renewed her OnDeck loan in September 2015 to move production from her small shop to a facility in Los Angeles. 14 To read more stories like Rachel's, visit: services@ondeck.com

15 Charlotte Tzabari - Olive My Pickle Jacksonville, FL "OnDeck gave us a loan that required very little paperwork. The daily payment feature also made it manageable to repay. Our bank won t loan us money, and the OnDeck loan was there when we needed capital for growth. OnDeck adds value to the customer s overall borrower experience and creates loyalty in the process." The Problem Charlotte and Shai Tzabari, owners of Olive My Pickle in Jacksonville, FL, have a lacto-fermented pickles, hummus, and olives business. Charlotte and Shai needed growth capital to break into new distribution channels. The Solution By the Numbers 5 years in business 1 day time to funding In May 2015, Charlotte and Shai started to look for funds. They heard about OnDeck through a web advertisement, and decided to apply. From start to finish, Charlotte and Shai had money in their bank account in one business day. $20k total borrowed The Result With the money from OnDeck, Charlotte and Shai were able to finance a six-month supply of seasonal inventory in just a few weeks, without borrowing from their farmers' market cash flow. 6 months of inventory financed 15 To read more stories like Charlotte's, visit: services@ondeck.com

16 The Problem The Solution The Result Chris Roberts - The Juice Cellar Bangor, ME "The financing from OnDeck allowed me to grow. I was able to purchase the advertising I wanted to help promote my business. Having sufficient capital at the onset of a big project, expansion, or a new location is so incredibly important. I wish I would have researched small business financing sources like OnDeck much sooner." Chris Roberts, owner of the Juice Cellar in Bangor, ME, has a raw juices, smoothies, and plant-based food restaurant. Chris needed growth capital to help market his business quickly after construction on a new location was completed later than expected. In May 2015, Chris started the search for financing. After learning about OnDeck through direct mail, he decided to apply and he was funded in three business days. By the Numbers 3 years in business 3 days $15k 15% time to funding total borrowed increase in customers With funding from OnDeck, Chris was able to purchase radio advertising, which resulted in a 15% jump in customers. Chris also purchased sandwich-making equipment with his OnDeck Line of Credit in mid- September. 16 To read more stories like Chris's, visit: services@ondeck.com

17 Britt Hollingsworth - Visiting Angels Plano, TX "I remember monthly insurance bills, royalties being due, and of course rent that was all stacked up at the same time. The [daily-payback] loan from OnDeck definitely helped us grow and took care of my cash flow obligations. I then devoted the remainder of the loan to some marketing ideas, and we had additional funds to invest." The Problem Britt Hollingsworth, owner of Visiting Angels in Plano, TX, has a home healthcare and elder care business. Britt needed capital to accommodate monthly cash flow during a billing cycle issue and launch a new marketing campaign. 3 By the Numbers years in business The Solution Britt decided to look for additional financing to help with his cash flow and marketing ideas. He first heard about OnDeck through direct mail and after deciding to apply, he was funded in just one business day. The Result 1 day $32k 30% time to funding total borrowed increase in inquiries With OnDeck funds, Britt took care of his cash flow obligations, and then devoted the rest to marketing both online and in the field. Britt saw a 30% increase in inquiries about Visiting Angels' services as a result of the marketing campaign. 17 To read more stories like Britt's, visit: services@ondeck.com

18 Matt Scott - Lemonjello's Coffee Holland, MI "Summer is an extremely busy time for us, and we needed financing for inventory and staffing. I'm glad I went to OnDeck - I set us up for success for when the opportunity for growth hit." The Problem Matt Scott, owner of Lemonjello's Coffee in Holland, MI, has a coffee beverage and baked goods business. Matt needed additional capital to purchase additional inventory and hire new team members during the busy summer months when tourists and college conferences arrive. The Solution In May 2014, Matt decided to look for financing. He was introduced to OnDeck though direct mail. Matt's application took minutes and he had his funds in the bank in one business day. The Result By the Numbers 13 1 day years in business $191.5K 10% time to funding total borrowed increase in sales With the funding from OnDeck, Matt was able to grow sales by 10% in the summer of 2014 with bulk inventory purchases and hiring new employees. Matt has since renewed his OnDeck loan, and used his funds to purchase an espresso machine and patio furniture to keep up with output of his high-quality products and excellent customer service. 18 To read more stories like Matt's, visit: services@ondeck.com

19 EXHIBIT B OnDeck Core Principles 19

20 OnDeck Core Principles OnDeck is transforming how small businesses access capital through lending and technology innovation. We are committed to establishing industry best practices and standards that ensure that small businesses are able to secure financing in a fair, efficient, and transparent manner so that they can get back to what they do best: growing their businesses, hiring workers, and fueling the economy. In support of this mission, we establish here key Principles that underpin how we engage with our small business customers. I. Offering Responsible Business Loans We are committed to building a sustainable and scalable model of small business financing that does not require public support or subsidy and that enables small businesses to grow and thrive. Our advanced technology and underwriting platform enables small business customers to efficiently obtain responsibly-priced and right-sized short term capital to help them grow, avoiding opportunity costs of long searches and the cost commitments of long term financing. Our pricing also requires that we adequately cover our costs and permits us to continue to invest in our business. As has been demonstrated by steadily decreasing rates, we remain committed to responsibly sharing efficiency and cost-savings with our customers through lower prices. We similarly work to ensure that our loan offers are appropriately-sized according to a business s performance and ability to repay, and are an appropriate fit for their intended use. Our loan products enable our small business customers to establish and build their business credit while growing their businesses, and the first $1 billion that we lent to small businesses is estimated to have generated more than $3.4 billion of economic activity. 21 II. Providing Truthful, Transparent, and Complete Information We are committed to ensuring that our small business customers are provided truthful, transparent, and complete information about our loans so that they can make prudent and informed decisions. OnDeck loans are best-received and utilized by our customers when they are able to easily understand the loan terms and determine whether the product is the correct fit for their needs. Accordingly, we have tailored our disclosure forms to provide transparency, ensure readability and accessibility, and help our small business customers understand and compare the total costs and terms associated with their loans. We remain committed to accurate and effective disclosure, and will continue to consider new approaches to furthering this goal. 1 Analysis Group, OnDeck Economic Impact Report (May 2014). 20

21 III. Enhancing the Customer Experience We are committed to ensuring that all aspects of a customer s OnDeck experience meet the highest standards of service excellence. To this end, we are keenly focused on providing our customers with the best user experience possible at all stages of interaction with OnDeck, both online and offline. We actively survey, monitor, and interact with our customers to understand their experience with us, and are dedicated to incorporating this feedback into our industry-leading best practices. This focus also extends to third-party intermediaries who engage with our small business customers: we have implemented industry-leading standards around how we partner with and monitor intermediaries and brokers who bring small business customers to OnDeck. Our policy relies on proper vetting, clear intermediary guidelines, ongoing monitoring, and consistent enforcement of third-party partner requirements. IV. Respecting Our Customers We are committed to serving as a trusted partner, promptly and fairly responding to inquiries, and treating our small business customers with respect in all matters. We greatly admire the determination and positive impact demonstrated by our small business customers on a daily basis. To do our part in supporting their success, we have a dedicated internal customer service group trained to provide excellent service. We understand the significant demands that small business owners face, and strive to be a trusted partner in helping our customers satisfy their objectives and grow their businesses. We take the same approach when our small business customers face difficulties: we do not permit delinquent or over-burdened borrowers to roll-over into a new loan, and we do not offer loan products built around late fees and penalties. We try to work with our customers facing financial hardship with the goal of placing them back on sound financial footing and giving them the opportunity to manage their outstanding commitments. V. Focusing on Privacy and Data Security We are committed to ensuring the privacy and security of our small business customer s information, and providing transparent disclosure of how borrower information is used. OnDeck has received TRUSTe s Privacy Seal signifying that our Privacy Policy and our practices have been reviewed for compliance with the TRUSTe program. A TRUSTe certified website is one that satisfies key data privacy and protection principles. Additionally, data security is of paramount importance to us, and we continuously work to enhance our security practices and resolve security vulnerabilities quickly and carefully. VI. Living by Our OnDeck Values We are committed to attracting and retaining the best team of professionals in the industry. We believe that the values of OnDeck ingenuity, impact, passion, and openness must first be reflected in the way we attract and develop our internal team. By retaining leading 21

22 talent anchored in a culture of integrity, we are able to execute on our guiding Principles and ensure service excellence for our small business customers. We believe that adherence to our OnDeck Core Principles will enable us to responsibly expand access to capital for millions of small businesses. We succeed when our small business customers succeed, and we remain committed to doing everything we can to advance our shared interest. 22