JPMorgan Chase is ending a three-year-old partnership with OnDeck Capital that enabled the bank to start offering online loans to small businesses.
New York-based OnDeck announced Monday that JPMorgan plans to stop originating loans through the partnership later this week. JPMorgan said that it will continue to offer online small-business loans, but will no longer do so in partnership with OnDeck.
“It’s been a great collaboration with OnDeck,” the bank said in a written statement. “They helped us create and launch an online loan application process that gave business owners faster decisions and easier access to credit, something we will continue to do on our own platform.”
Under the partnership,
OnDeck CEO Noah Breslow called the JPMorgan’s decision “a setback” during a conference call Monday. OnDeck took a $900,000 impairment charge in the second quarter for technology that supported JPMorgan loan originations. The company said that it will continue to service previously originated JPMorgan loans for up to two years.
OnDeck, which was founded in 2006, also offers loans to small businesses through its own website. The firm has sought to use the JPMorgan partnership as the foundation of
OnDeck also announced Monday that it plans to pursue a bank charter, either by applying for one or by acquiring a bank.
Breslow said that the company concluded that benefits of becoming a bank, which include a lower cost of funding, greater regulatory certainty and the ability to offer more products, outweigh the costs. The company did not reveal a timetable for becoming a bank or say which type of bank charter it might pursue, though Breslow said that the options do not currently include the fintech charter being developed by the Office of the Comptroller of the Currency.
Shares in OnDeck fell by 18.9% in early trading Monday.
