NEW YORK ( TheStreet) -- On Deck Capital (ONDK) - Get Report is set to begin trading Wednesday after pricing its initial public offering on Tuesday night, but it looks like a riskier bet than Lending Club (LC) - Get Report, another online lender, which had its IPO last week.

On Deck shares were priced at $20, above the suggested range of $16-18. Lending Club also priced above its range, and opened 67% higher last week.

"The trading performance of Lending Club is clearly to the benefit of On Deck. They are, however, two different companies," said Kathleen Smith, principal of IPO ETF manager Renaissance Capital.

Both are start-up online lending platforms, but an important difference is that On Deck takes some of the risk on its balance sheet, while Lending Club merely charges a fee for bringing borrowers and lenders together.

On Deck focuses mainly on lending to small businesses -- an area big banks like Bank of America (BAC) - Get Report, Wells Fargo (WFC) - Get Report and JPMorgan Chase (JPM) - Get Report have largely abandoned as unprofitable. While Lending Club also has entered the small business lending space, its chief focus has been personal loans to people consolidating credit card debt. And while anyone can lend through Lending Club, in amounts as small as $25, On Deck's lenders are mainly institutions.

Start-up online lenders are seeing huge success because they are more nimble than big banks, which have massive overhead and are unpopular with the public, argued Charles Moldow, general partner at VC firm Foundation Capital, which is an investor in both companies.

He said banks charge interest rates that are on average 4% to 5% higher than online start-up lenders.

Still, rates for online start-up business lenders such as On Deck, Kabbage and CAN Capital are very high. On Deck's rates can get as high as 50% annually.

Moldow said the high rates reflect the big risks the start-ups take by approving loans quickly. He said businesses use them on a short-term basisi to get quick cash and avoid missing out on revenue opportunities that are right in front of them.

Investors buying into the IPO will have to cast aside traditional multiples such as price to earnings and bet that On Deck can keep growing in an increasingly competitive field.

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