J.P. Morgan Chase & Co., the biggest bank in the U.S., is the latest to partner with an alternative lender, striking a deal with OnDeck Capital Inc. to deliver loans to its small business customers.
“We’re working with OnDeck to build a new Chase lending product that will be launching in 2016 for small-dollar loans to our small-business clients,” Jennifer Piepszak, J.P. Morgan’s head of business banking told Bloomberg. “By combining Chase’s relationships and lending experience with OnDeck’s technology platform, we’ll be able to offer almost real-time approvals and same- or next-day funding.”
Alternative lenders have been growing fast as they use a broad amount of non-traditional data to determine whether someone is a “good credit or not,” says J.P. Morgan Chief Executive Officer Jamie Dimon. They have therefore been able to quickly underwrite smaller loans — $250,000 and below — that banks have trouble doing.
Since its founding in 2007, OnDeck has lent out more than $3 billion to small business owners using its proprietary assessment to determine the borrower’s credit worthiness. While their higher than traditional bank lending rates have earned them a lot of criticism, their Internet proprietary assessment has enabled would-be users to get a “Yes” or “No” answer on their loan applications quickly, and this has been a key selling point.
The recent partnership follows J.P. Morgan’s strategy of increasing its revenue by growing its small business unit. Piepszak became Chief Executive of Chase Business Banking in January with the mandate of leveraging opportunities to cross-sell small business banking, payment and credit card processing services to generate additional revenues.
The new product will definitely allow small business owners to enjoy the best of both worlds. The service will be available over the Internet to some of J.P. Morgan’s small business clients starting January 2016.
J.P. Morgan photo via Shutterstock