eCommerce merchants who need a boost in cash flow have probably considered Shopify Capital as a source of funds. Are you wondering if you should accept a funding offer from Shopify? …I can help you decide!
In this post, I’m going to dive into exactly what Shopify Capital is, eligibility requirements, why you may or may not want to apply for an offer, and introduce some alternatives you may want to consider.
Here’s what’s in store:
- What is Shopify Capital?
- Shopify Capital Loan Summary
- Shopify Capital Alternatives
- Frequently Asked Questions
- Conclusion: Is Shopify Capital Funding Worth it?
So, let’s roll!
What is Shopify Capital?
Shopify Capital is like your online store’s financial wingman. It swoops in to offer cash advances to businesses that are rockin’ it on Shopify. If your store has a good track record and plays nicely with the Shopify platform, you might just be eligible to request a cash boost.
This extra dough can be a game-changer – you can use it for all sorts of things like:
- Investing in more inventory
- Revving up your marketing
- Setting up shop in a physical store
- Bringing in some extra hands to help out
So, Shopify Capital is essentially designed to help you scale your business.
But, there are tons of financial offers out there that can help you do this. How do you know if this is the one? Keep reading.
Founded in 2004, Shopify, aka Shopify Payments, aka Shopify Data Processing is a Canada-based, publicly-traded for profit company worth $1.3B. The company is leading the eCommerce game with their token online sales platform (but you already knew that, didn’t you?).
I won’t delve too deep into Shopify’s app store or Shopify Plus – the enterprise eCommerce platform – but, I do want to take a quick look at the history of Shopify Capital.
The company launched Shopify Capital in April 2016, as a merchant cash advance offer. Since then, they’ve provided billions of dollars in funding to their sellers worldwide.
All Shopify Capital loans are funded by WebBank, which is also affiliated with Dell Business Credit, LendingClub, and Capital on Tap. While these aren’t my favorite funding offers for business owners, they are legitimate offers.
What are the Benefits of Shopify Capital?
Shopify Capital offers several benefits to eligible businesses:
- Quick, easy access to up to $5M – Shopify Capital simplifies the funding process. If your business qualifies, you can access the funds you need swiftly, which allows you to capitalize on opportunities or address financial challenges without lengthy approval processes.
- No fixed repayment schedule – One of the perks is that repayments are tied to your daily sales. This means that when your sales are high, you’ll pay back more. But, during slower periods, the repayment amount decreases, making it more manageable.
- No personal guarantees – Unlike some traditional loans, Shopify Capital doesn’t typically require personal guarantees (PGs), which reduces your personal financial risk.
- Customized funding – Shopify Capital tailors the funding amount to your business needs based on factors like your store’s history and performance.
- Invest in business growth – You can use the funds to invest in your business, with the goal being to increase your future profits.
- Transparent fees – The costs associated with Shopify Capital are straightforward, so you won’t encounter hidden fees or surprises.
These benefits make Shopify Capital an attractive option for Shopify merchants looking to fuel their business growth and address financial needs with flexibility and convenience. Now, let’s take a look at the actual details of the loan and how it stacks up in the lender marketplace.
Now, let’s explore the cash advance offer in more detail.
Shopify Capital Loan Summary
When deciding whether a Shopify Capital loan is right for you, I think it’s most important to look at eligibility requirements, terms and repayment, and alternatives. So, let’s look at each of these facets of the offer.
Note: These details relate to the U.S. offer only. For other countries, see the Shopify help center.
Shopify Capital Eligibility Requirements
Shopify Capital has certain eligibility requirements to qualify for its merchant cash advances in the U.S.
To be eligible, your business should meet the following criteria:
- Use Shopify as your sales platform – You need to be a Shopify merchant, which means your business should operate on the Shopify platform to apply for Shopify Capital.
- Location – This program is available specifically for businesses in the United States, so you should be operating within the U.S. to be eligible (comparable offers are available for businesses in Canada, Australia, and the U.K. as well).
- Sales history – Shopify Capital considers your store’s history, which means businesses with a track record of sales on the platform are more likely to qualify.
- Risk profile – The amount you can receive and the remittance rate depend on your risk profile. Factors like your store’s performance, sales, and other business metrics are assessed to determine this.
Remember that eligibility doesn’t guarantee funding, but meeting these criteria is a good start if you’re looking to access funds through Shopify Capital. It’s like a helping hand for businesses that are already up and running on Shopify in the United States.
If you have more questions or need further information, feel free to ask!
Shopify Capital Terms & Repayment
When Shopify Capital offers you a cash advance, it’s like giving your business a boost of cash. They’ll hand you a lump sum of money, and you pay it back from your daily sales. No need to stress about a fixed schedule for repayments. Instead, it’s a percentage of your daily sales, which is called the remittance rate.
Now, about those fees – the terms are pretty straightforward.
Shopify Capital tells you upfront how much they’ll take for the cash they give you. So, let’s say they give you $5,000, and the fee is 10%. You’ll pay back a total of $5,650, which includes the initial $5,000 plus the 10% fee.
Payments are automatically deducted from your daily sales, so you don’t have to worry about missing an installment. You can also choose to pay off the balance whenever you like – it’s all pretty flexible.
And the best part?
No rush to pay it all back…there’s no set deadline. It’s all based on your daily sales, so when business is good, you pay more, and when it’s slower, you pay less.
Easy peasy, right? Well…not so fast.
Before you jump in head-first, consider how consistent your sales have been, and whether or not you anticipate any slow periods.
If you’re unsure, you may not want to get in over your head. Shopify does have the right to collect their funds, even if your customers decide to hit the road and go somewhere else (it would be unfair if they didn’t).
Overall, Shopify Capital’s terms are what I would expect from any cash advance offer. And, their factor rates of 1.1 and 1.13 are reasonable, with other offers being as high as 1.5 and beyond.
How to Apply for Shopify Capital
Applying for a Shopify Capital cash advance is a super straightforward process:
- Log In to Shopify – If you have a Shopify store, log in to your account.
- Find Capital – Look for the “Capital” section in your Shopify settings.
- Pick an option – They’ll show you choices for how much money you want and how you’ll pay it back. Choose the one that works for you.
- Verify who you are – They’ll need to make sure you’re really you, so be ready to confirm your identity.
- Say yes to the rules – Read and accept the rules they give you. It’s like agreeing to the terms.
- Switch to Shopify Payments (if needed) – If you’re not already using Shopify Payments, they might ask you to switch to it.
- Submit your request – Hit the button to send in your request. Now, wait a bit for them to look it over (usually 1-3 business days).
- Get your money – If they say yes, they’ll put the money in your business bank account within two business days.
That’s it!…Ready to explore other options before you make that final decision?
Shopify Capital Alternatives
|Exclusively for Shopify merchants
|Available for Stripe users
|Open to various businesses
|Requires a history with Shopify
|Based on your Stripe activity
|Open to businesses with requirements
|Quick approval and funding
|Rapid approval and funding
|Quick funding decisions
|Daily percentage from sales
|Daily percentage from sales
|Fixed daily or weekly payments
|Flexible based on daily sales
|Adjusted based on sales
|Fixed repayment schedule
|Fixed fee determined upfront
|Fixed fee determined upfront
|Fees based on risk and terms
Each of these cash advance options has its own strengths and caters to different business needs.
Shopify Capital is ideal for Shopify store owners seeking flexible, sales-based repayments. Stripe Capital is for Stripe users and offers rapid funding. Credibly offers financing to a broader range of businesses but with varying terms based on risk.
Now, a merchant cash advance has never been my go-to for business funding – You have many other options that are often more ideal.
For one, traditional loans are like the ones you get from banks and credit unions, often cheaper but harder to secure because they require a strong credit history and collateral. And, business lines of credit work like credit cards for your business, offering flexibility, but interest rates can fluctuate. Both of these are pretty standard, and you can get into these types of funding when you maximize your business credit.
Next, SBA loans, backed by the government, come with good rates and reasonable monthly payments, but their complex application process can be challenging. Then, online business loans, like offers from Become, Lendio, or Fundbox – provide quick funding but may have fairly high costs.
Moreover, crowdfunding and peer-to-peer lending let you seek funds online, but success isn’t guaranteed. Finally, if you have personal savings or assets, you can use them, but it involves a risk to your personal finances.
Remember, the best choice depends on your specific business situation and preferences. So, consider your needs and the terms that suit you best when deciding.
Frequently Asked Questions
Can you negotiate Shopify Capital?
No. Shopify Capital offers fixed terms, including fees and repayment percentages, which are not negotiable.
How long does it take for Shopify Capital to be approved?
The approval process typically takes 1-3 business days, but in some cases, it might take longer.
What percentage of profits does Shopify take?
Shopify Capital takes a fixed fee, which is determined upfront. The percentage varies based on your specific cash advance offer.
What company owns Shopify?
Shopify is an independent company, and it’s publicly traded on the New York Stock Exchange and the Toronto Stock Exchange. It has been shareholder-owned since 2015.
Conclusion: Is Shopify Capital Funding Worth it?
In most cases, I don’t recommend merchant cash advances for business funding, because the fees tend to be super steep, and better options are usually available. With that said, Shopify Capital does have a reputable offer with fair terms…Plus, it’s super easy to pay back one of these cash advances (how long that takes will depend on your sales).
So, if you like the offer, your business is located in a region where it’s available, you meet the other eligibility criteria, and you really need the money now, go ahead and apply.
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