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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.
This funding source is a good way to fund your business if you are looking for growth. The most important thing to note is the intent behind obtaining funding. You will want to make sure that you are funding your business for the right reasons and in the right way. With that being said, we will look into a couple of alternate funding methods which will help you make as informed of a decision as possible.
Onto our Shopify Capital review!
Helpful Business Links
Divvy Business Credit Card: Fast and flexible business credit when you need it.
Divvy Business Credit Builder: A program to help businesses build their credit.
Swipesum: Find the cheapest credit card processing solution that is best for your business.
Toptal: Hire ex-Google, Apple, and SpaceX freelancers online.
99designs: Create graphic design contests with top talent from around the world.
Carbon Easy: Grow your business by carbon offsetting with Paying Green®.
Shopify Capital Funding
Shopify Capital offers eCommerce business loans as well as merchant cash advances.
- Short term cash loans
- Merchant cash advances (working capital loans)
In need of fast and flexible business credit? Check out Divvy.
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.
This invitation will not be offered if your store has not hit a certain success threshold. When Shopify labels your store as a profile that can handle a loan then you will receive an invitation. It is important to note that an invitation doesn’t necessarily mean that you are already approved. This is simply an invitation to apply so a decision could be made after your specific case is looked into.
You may be working your eCommerce store off of a different platform than Shopify. If that is the case and you are looking to receive funding for your business, then make sure you check out some of the other options as there are many similar services offered to eCommerce merchants.
RELATED: No Credit Check Loans For Business.
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.
In order to be considered a low-risk profile, you have to have at least a moderately successful Shopify store. This ultimately means that you have been making consistent sales for a certain period of time. Shopify wants to work with low-risk stores because loan repayments are based on future sales.
Shopify Capital Loan
Shopify Capital offers the following ecommerce loans for business:
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.
These short-term cash loans are attractive due to the fact that there is a flat rate decided at the beginning of the loan. This means that no matter what the merchant understands how much he or she will be paying back to Shopify. On loans with interest, this could be a little tricky, so some merchants find it easier to work with these simplified flat rates.
RELATED: BlueVine Business Loans.
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.
To many businesses, this is a better way to go than a loan. It makes the repayment process much simpler to have Shopify take a part of your future sales. This essentially makes it a hands-off way of paying Shopify back and that is something that some merchants find to be better for their specific situation.
RELATED: Fundera Business Loans.
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.
RELATED: SmartBiz Business Loans.
How Does Shopify Capital Work?
The following sections explain how to apply for Shopify Capital loans and merchant cash advances.
Application And Approval Process
How to get a working capital loan with Shopify Capital:
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. This is beneficial for those who may not be in the best situation with credit and feel that they can get a return on this investment.
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 on Merchant Cash Advances & Shopify Loan Reviews
Overall, customer reviews for Shopify Capital are not very encouraging. Many of the Shopify Capital complaints 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 commenters 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.
These are all things that Shopify could hopefully work out in the future. Since this service is still rather new it is evident that there will be room for improvement. The good news about this is the fact that most of the negative reviews don’t come directly from the loans, they are instead geared more towards the customer service and application process.
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.
RELATED: Amazon Lending Business Loans.
Shopify Capital Pros and Cons
Below are some of the Shopify Capital review pros and cons you should be aware of.
- 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.
Why Use Shopify Capital?
Financing a business could be a good way to either start or build a business. Shopify Capital allows you to build on your existing Shopify business. You can use your capital in a variety of ways. This could be expanding your inventory by investing in more products, funding a payroll as you hire a bigger team, or even pumping more money into marketing to boost sales. Using Shopify Capital to your advantage could boost your business up a step.
This service offered under Shopify is attractive due to the fact that it is easier to get funding through this source. There is no credit check and far less paperwork than if you were to go elsewhere. However, this comes with higher costs for the loan, so it is very important that there is a specific need for this funding before it is applied for.
Shopify Capital Alternatives & Competitors
Shopify Capital is one of many financing solutions available to businesses. It is certainly a good idea to research some of the similar ones before diving into a deal. There may be a lending company that is a better fit for your specific situation. Each service is going to offer something a little different, this could be a different application process, a required credit check, or a different payback rate.
Making sure that your business is being funded by the best-fitting financing solution is vital to the growth of your business. With that being said, let’s take a look at some of the highest-rated alternative funding options.
- Payability: This outlet offers funding specifically to eCommerce stores and is not exclusive to just Shopify users. This is great for anyone who is interested in Shopify Capital but hosts their eCommerce store on a different platform.
- Square Capital: This is another platform that takes a look at your history of sales in your eCommerce store. They give you offers that are tailored to your history and then offer a very similar payback option through future sales.
- Fundbox: With Fundbox, you are given a line of credit as opposed to a lump sum of cash. This could be beneficial for someone who isn’t quite sure how much money their business needs as you’d be able to use the credit as you need it. The requirements to be eligible for Fundbox are that you need to do at least $50,000 in annual revenue and have an invoicing history of at least 3 months.
These funding solution outlets all have similar qualities, but there are some variables that need to be weighed out to ensure that you are funding your business in the best way possible. When going into this deal make sure you know how much you will be paying back as well as how those payments will be made.
RELATED: Biz2Credit Business Loans.
Frequently Asked Questions (Faq)
We answer some of the most frequently asked questions below.
What is the Shopify Capital factor rate?
Shopify Capital does not charge interest on the funds borrowed, instead, there is a factor rate of 1.1 or 1.13.
What is the Shopify Capital interest rate?
Shopify Capital merchant cash advances don’t carry an interest rate, instead, they carry a factor rate.
What are Shopify Capital cash advances?
A Shopify merchant cash advance is for eCommerce Shopify users only. Shopify will send you an email as well as display a message in your Shopify dashboard stating you are eligible for a cash advance. You will receive a lump-sum payment directly into your bank account for a fixed fee. You then pay Shopify back a percentage of your daily sales till the loan (merchant cash advance) is paid off.
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.
Enjoy our Shopify Capital review?
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