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Shopify Capital Review
What is Shopify Capital? While most people have heard of Shopify, many are not aware that the popular e-commerce platform also offers low-cost business financing solutions via Shopify Capital. Depending on your current situation, Shopify Capital may be a great fit for your company’s working capital needs.
Shopify Capital was introduced in 2016 and operates similarly to PayPal Working Capital. Like PayPal Working Capital, Shopify Capital already has its users’ relevant sales and turnover data, which makes the application process faster than most traditional lenders. While it has plans for expansion, at the moment Shopify Capital offers short-term loans and cash advances. Additionally, it is important to note that only companies and individuals currently using the Shopify e-commerce platform are eligible for these Shopify Capital services.
Onto our Shopify Capital review!
Shopify Capital Funding – Services Offered
- Short term cash loans
- Merchant cash advances (working capital loans)
Shopify Capital Loan Eligibility
US businesses located in the following states are eligible for a Shopify Capital Loan:
Shopify Capital is now also available in Canada
Shopify Capital Merchant Cash Advance Eligibility
Available in all US states:
- New Hampshire
- New Jersey
- New Mexico
- New York
- North Carolina
- North Dakota
- Rhode Island
- South Carolina
- South Dakota
- West Virginia
Shopify Capital Approval
Can anyone apply for a Shopify Capital loan? No, merchants are offered funding from Shopify Capital if they meet their requirements and eligibility. You cannot apply for a loan without an invitation from Shopify.
Shopify Capital Requirements
In order to be eligible for Shopify Capital services, a business must be located in the United States, have Shopify payments enabled, have a low-risk profile, and must have a certain amount of gross merchandise volume.
Shopify Capital Loan
Short Term Cash Loans
Short term cash loans are like cash installment loans. They do not carry interest rates instead they carry a factor rate. For example, Shopify Capital uses a factor rate of 1.1 or 1.13.
If you borrow $1000 at the factor rate of 1.1 then you will have to repay $1100. Shopify short term loans carry 60-day repayment milestones. This means customers will be issued a 60-day milestone which they will have to meet.
Each short-term cash loan will need to be repaid within 12 months. Each 60-day milestone will require the borrower to repay 1/6th of the total loan.
Merchant Cash Advance (Shopify Working Capital Loan)
A merchant cash advance (MCA) is not a type of loan; instead, it is an advance of cash against future revenue, or what is commonly referred to as a working capital loan.
Therefore, instead of taking a loan and becoming a debtor, the business that takes out the MCA essentially sells its future revenue to the borrower at a discount.
MCA’s carry a factor rate instead of an interest rate. In order to collect your payments, Shopify Capital will deduct a predetermined amount from your revenue each day.
Shopify MCA’s do not have any repayment date or term limit per se. Instead, the repayment will fluctuate daily, as it is attached to the borrower’s cash flow.
Their withholding rate (also known as remittance rate) starts at 10%, which means 10% of daily revenue will be deducted every day against the MCA. However, in some cases the withholding or remittance rates vary, since it is based on the amount of cash flow.
Shopify Capital Eligibility Review
How to get Shopify Capital? Unlike other online lenders, Shopify Capital does not require borrowers to have a certain threshold of revenue or profitability. Instead, Shopify Capital assesses the cash flow of the borrowers to determine their eligibility for loans or MCAs.
If a Shopify user is eligible, Shopify will notify that user via email and in the Shopify dashboard. However, outside of this automated predetermination system, there is no other way to apply for Shopify Working Capital.
How Does Shopify Capital Work?
Application And Approval Process
As stated previously, Shopify Capital does not have an active application process like other lending platforms. Instead, Shopify’s automated system monitors the merchant’s Shopify account, and if they meet the eligibility criteria then a notification is sent to the business/user. The notification will provide different lending options for the businesses to choose from.
Once a Shopify user selects a lending option, underwriters will get involved in the process and carry out a soft check on your eligibility. At this point, some prospective borrowers may be notified that they are not eligible at all, or not eligible for the presented offers. In the former case the user will be notified that they are no longer eligible, while in the case of the latter the user will be offered different lending packages.
Shopify DOES NOT perform a credit check at any point in this process, and there will be no changes at all to your credit score as a result of interacting with Shopify Capital.
If your business is eligible for the selected lending package and accepts the Shopify Capital agreement, the funds will be transferred to the user’s bank account within 2-5 working days.
Terms & Rates
Borrowers or customers of Shopify must keep in mind that although Shopify does not apply any annual percentage rate (APR), it is a good idea to carry out your due diligence before taking any offer as it has been seen that in some cases the offers from Shopify can sometimes be more costly as compared to the market.
Shopify Capital Rates
- Borrowing limits: $400 – $500,000
- Term Length of 12 months or less for short term cash loans
- No maturity date for MCA
- Factor Rate: 1.1 or 1.13
- Origination Fee: N/A
- Collateral: N/A
Shopify Capital provides customer service through the following mediums of communication
- Phone (available 24/7)
- Live Chat
Our research indicated that while most customers expressed satisfaction after their experience with Shopify Capital customer service, many other customers were left disappointed after their experience.
Most unsatisfied customers complained that the representatives have a one size fits all approach, which could indicate that the customer service staff is either not trained properly or does not have enough experience to interact with the customers in an appropriate manner.
Shopify Capital Phone Number
North America: 1-855-816-3857
Shopify Capital Reviews
Merchant Cash Advances & Shopify Loan Reviews
Overall, customer reviews for Shopify Capital are not very encouraging. Many customers have expressed disappointment and confusion with Shopify Capital, and it appears that its terms of service are not clearly understood by many of its customers. This could indicate a failure on the part of Shopify Capital to clearly explain its products Many commentators have also expressed concerns that since Shopify Capital is relatively new and since their financing and lending products differ considerably from other online lenders, there is a need to better explain the products and offers to the customers more clearly.
Additionally, some borrowers have complained that the cost of borrowing from Shopify is too high, especially when compared to other lenders. However, customers who gave Shopify Capital positive feedback have praised the speed of the application process and rapid access to funding, and have indicated that the ease of transactions is worth the higher cost. Additionally, many reviewers appreciate the fact that Shopify does not require a credit check as well.
Pros and Cons
- Fast and efficient application process
- No need to keep track of payments
- No minimum credit score or credit check required
- Only available to Shopify users
- More costly than other loan alternatives
- Limited borrowing options
- Low funding amounts narrowly aimed at small businesses
Shopify Capital Second Loan
When you remit (payback) 85% of your Shopify Capital balance you will be reviewed for more funding.
Shopify Capital United Kingdom – powered by YouLend
If you run a business in the UK and you are looking for funds to grow your company, you might be eligible for a cash advance from YouLend, a Shopify Capital partner.
Shopify Capital Review: Is Shopify Capital a Good Fit for You?
Is Shopify Capital a good idea? If you are a Shopify user and you have been sent a notification stating you are eligible for Shopify Capital then you should weigh your options and carry out due diligence before accepting. Many users state that Shopify Capital loans are easy and convenient, so if you do not have much time to shop for a different loan this could be a great option. While the cost of Shopify Capital’s lending services may be a bit higher than other options, many past customers believe the ease of the transactions makes up for the higher cost.
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Enjoy our Shopify Capital review?
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