Is loan "stacking" the blind spot of the online lending industry? Reuters reports that online lenders are failing to detect multiple loans by borrowers who slip through their automated underwriting systems. OnDeck counters by explaining that they educate and discourage business owners from taking on high interest, high risk loans from a separate class of lenders on top of existing loans.
Some small business owners will keep borrowing as long as lenders grant approvals, taking one loan after another, said chief executive Doug Naidus. But at some point, he cautioned, the principal needs to get paid back. "The fifth stack pays the fourth stack, and the sixth stack pays the fifth stack," Naidus said. "But when the music stops, everybody's got to find a chair."