The underwriters for the offering are Morgan Stanley, Raymond James, Bank of America Merrill Lynch, J.P. Morgan, Stifel, Deutsche Bank, Needham and Jeffries.
On Deck is an online platform for small business lending. Small businesses can apply for a term loan or line of credit on the website in minutes, and On Deck can make a funding decision immediately and transfer funds as fast as the same day. The company has originated more than $1.7 billion in loans and collected more than 4.4 million customer payments since its first loan in 2007. Loan originations have increased at a compound annual growth rate of 127% from 2011 to 2013 and had a year-over-year growth rate of 171% for the nine months ending in September.
The small business lending market is vast and underserved. According to the FDIC, there were $178 billion in business loan balances under $250,000 in the United States in the second quarter of 2014, across 21.7 million loans. Oliver Wyman, a management consulting firm and business unit of Marsh & McLennan, estimates that there is a potential $80 billion to $120 billion in unmet demand for small business lines of credit. On Deck believes that the application of its technology to credit assessment can stimulate additional demand for its products and expand the total addressable market for small business credit.
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On Deck lends to a wide variety of small businesses across more than 700 industries and in all 50 U.S. states. It recently began lending in Canada. The top five states that originated loans in 2013 and in the nine months ended September 30, 2014, were California, Florida, New York, Texas and New Jersey.
In the filing, the company explained its financials as:
In 2013, we originated $458.9 million of loans, representing year-over-year growth of 165%, and in the first nine months of 2014, we originated $788.3 million of loans, representing year-over-year growth of 171%, all while maintaining consistent credit quality. In 2013, we recorded gross revenue of $65.2 million, representing year-over-year growth of 155%, and in the first nine months of 2014, we recorded gross revenue of $107.6 million, representing year-over-year growth of 156%. During 2013 and the three months ended September 30, 2014, our Adjusted EBITDA was $(16.3) million and $2.6 million, respectively, our (loss) income from operations was $(19.3) million and $0.7 million, respectively and our net (loss) income was $(24.4) million and $0.4 million, respectively. See the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures” for a discussion and reconciliation of Adjusted EBITDA to net (loss) income. As of December 31, 2013 and September 30, 2014, our total assets were $235.5 million and $466.0 million, respectively and the unpaid principal balance on loans outstanding was $216.0 million and $422.1 million, respectively.
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