Shopify Capital Review: Short-Term Business Funding

Pros

• No credit score requirements
• Competitive rates
• No extra fees
• Easy application and speedy funding
• Direct repayments from sales

Cons

• Available only to Shopify users
• Shopify initiates the process
• Frequent repayments required
• No long-term financing options

Shopify Capital Overview

Shopify Capital promises to connect Shopify sellers with fast, easy access to nontraditional small business loans. Can Shopify Capital deliver? How much will it cost to access a small business loan through Shopify Capital? And is Shopify Capital safe to use? Let’s look at everything you need to know to decide if a Shopify loan is right for you.

In general, Shopify is highly regarded by eCommerce experts and business owners alike, and our Shopify review explains why we consistently include Shopify in our list of the best eCommerce platforms. But if you didn’t already have enough reasons to like Shopify, here’s another: Users may be eligible for hassle-free, relatively low-cost business financing through Shopify Capital, a business finance program similar to Square Capital or PayPal Working Capital.

Because Shopify already has access to information about its users’ business and revenue, the process of applying for funding may be quicker and easier than with other financing options available to you. Although especially creditworthy borrowers might be able to find better rates elsewhere, Shopify Capital’s rates and fees are relatively low-cost and competitive with similar funders.

Services Offered By Shopify Capital

Shopify Capital offers short-term business funding in the form of merchant cash advances and short-term loans. Although these financial products differ by technicalities, you will see little difference between the two in practice.

When you accept a merchant cash advance, the funder buys a percentage of your future credit and debit card sales for a lump sum. If you take a Shopify Capital merchant cash advance, Shopify will collect its percentage of the sales each business day by holding back a portion of your card-based sales. Because your sales may ebb and flow, you won’t have a set term length or a fixed payment amount. You’ll continue to pay that percentage until the full debt is repaid.

Short-term loans, on the other hand, grant the borrower a lump sum. The borrower pays the loan back, plus a flat fee, over a set period, usually less than a year. For most short-term loans, payments typically are broken up into even installments that are paid back daily or weekly.

Shopify Capital Project Qualifications

Be aware that you cannot apply for Shopify Capital. Instead, Shopify will monitor your account and alert you if you are eligible. If you haven’t received an offer, that means you are not eligible. Note that Shopify Capital loans are available only to merchants in the US and Canada, though some business funding in the form of cash advances may be available to merchants in the UK.

To qualify for Shopify Capital, you don’t need to meet any specific qualifications regarding time in business, revenue, or personal credit score:

Instead, Shopify will evaluate your cash flow based on your Shopify activities. The company does not disclose the criteria it uses to determine whether you receive an offer. To be eligible for funding, however, you’ll definitely need to:

• Have a profile that is considered low-risk
• Process a certain amount of sales
• Have Shopify Payments or another third-party payment provider enabled. Shopify does not say directly but implies that merchants using Shopify Payments may have a slight advantage. Note that if you use Shopify Payments when you receive funding from Shopify Capital, you cannot deactivate Shopify Payments until you’ve fully repaid the amount you owe.

Shopify Capital Terms & Fees

These are the terms and fees for Shopify Capital merchant cash advances and short-term loans:

Shopify Capital financing is in the form of a short-term loan or a merchant cash advance. From the customer’s perspective, however, they look very similar. The main difference is that you have to meet 60-day repayment milestones if you have a loan, whereas business owners with an advance do not have to meet periodic repayment goals. Merchant cash advance rates are typically higher, however.

Shopify Capital does not charge interest rates. Instead, your borrowing fee is calculated using a factor rate.

Here’s how it works: Shopify calculates a fee based on your borrowing amount, which determines how much you have to repay. To come up with the repayment, Shopify will multiply the amount you’re borrowing by a factor rate, which will be either 1.1 or 1.13. So if you borrow $10,000, Shopify will collect a total of either $11,000 ($10,000 x 1.1) or $11,300 ($10,000 x 1.13).

Instead of paying a fixed sum each day or month, Shopify collects its cut by deducting a percentage of your revenue each day. Typically, this is called a “withholding rate,” but Shopify calls it a “remittance rate.” The remittance rate that Shopify uses as an example is 10%, but your rate might be higher or lower. Because the amount collected fluctuates with your cash flow, you will not have a set repayment date. Instead, Shopify simply keeps withholding its daily cut until the total repayment amount has been collected.

For merchant cash advances, Shopify offers an example with a $5,000 cash advance with a repayment value of $5,650 and a remittance rate of 10%. In this example, you would receive $5,000 in your business bank account and Shopify Capital would receive 10% of your store’s gross daily sales until the full $5,650 has been remitted. After you repay over 25%, you can choose to remit the remaining balance in a single lump sum.

If your Shopify Capital financing is a loan, you will have to repay it in 12 months or less. Shopify sets milestones every 60 days to keep you on track. You must repay at least 1/6th of your repayment amount at each milestone. For example, if you have a repayment amount of $11,300, you must repay at least $1,884 every 60 days. Business owners who receive a merchant cash advance will not have to meet milestones.

Although cash advances and short-term loans don’t charge interest and, therefore, don’t technically have an annual percentage rate (APR), borrowers may want to calculate a rough APR for comparison.

To learn more about APRs and how to calculate them for business loans, check out our article, APR VS Interest Rate: Know The Difference.

Shopify Capital Application Process

You cannot directly apply for Shopify Capital — the company monitors your account and sends an alert by email and in-app if it thinks you’re eligible. If you are alerted, you will be able to choose from a few different offers, which will vary by borrowing amount, remittance rate, or other elements.

An alert doesn’t guarantee funding, however. After you choose the offer best suited for your business, Shopify’s underwriters will look at your account. When humans get involved, they may find that you are not eligible for the offers presented to you (in which case, they may provide alternative offers), or that you are not eligible for funding at all. At this stage, you may also have to provide additional information for verification purposes.

If you choose to accept the offer presented to you after underwriting, the money will be sent to your bank account. Shopify states that the time from requesting funds to approval generally takes between two and five business days, and it takes another day to receive the funds in your account. If you switch your payment provider to Shopify Payments at the same time, however, approval might take a little longer.

Sales & Advertising Transparency

Although the wording can be a little confusing and overly technical, Shopify provides a fair amount of information about its Capital product on its website. You should be able to get a basic idea of what to expect before getting too involved in the process. Expect to click through some FAQs to find what you’re looking for.

The main issue prospective borrowers may have here is that qualifying is largely a passive experience, the workings of which are mostly invisible to them. Shopify will use its undisclosed formulae to decide whether or not you qualify for funding, and there’s not much you can do other than accept or decline what’s offered to you.

Customer Service & Technical Support

Customer service is available via phone, email, or live chat. Phone support is available 24/7.

Reactions to Shopify’s customer service tend to be diverse. Although many customers are happy with their customer service experience, many other customers have been frustrated with the representatives’ taking a seemingly cookie-cutter approach to solving problems.

You may also be able to find an answer to your problem on Shopify’s Help Center, where you’ll find 126 returns on a search for Shopify Capital, and in the Shopify community forum.

Shopify Capital Reviews, Complaints, & Testimonials

Negative Reviews & Complaints

Customer reviews for Shopify Capital are minimal. Some people have expressed hesitation, but reactions from customers who have actually used Shopify Capital are relatively scarce. As is usually the case for big companies that dabble in loans, it’s not easy to separate the capital reviews from those of the broader service. For example, Shopify has an A+ rating with the BBB, with 320 complaints on file and no recent complaints that are related to loans.

Criticisms in Shopify Capital reviews include:

• Confusing Service: Many Shopify customers are confused by the service and when it is and isn’t available. As stated above, Shopify uses careful “legalese” wording on its website, which can be a little confusing. To ensure you fully understand the cost of the advance, take a look at the factors you should analyze before accepting funds.
• Passive Application: You can’t apply for Shopify Capital when you need a loan; Shopify Capital solicits you when Shopify feels you’re qualified for financing.
• Can Be Expensive: While Shopify Capital rates are pretty good within their class, they can be expensive relative to a bank loan, with APRs that can easily reach into the 30s.
• Rigid Repayment Options: Some customers complained about giving up a percentage of their daily revenue to repay their debt. Others complained that they couldn’t pay it back faster unless they wanted to pay it all in one lump sum.

Positive Reviews & Testimonials

While Shopify has some case studies on its website, independent customer reviews that focus exclusively on Shopify Capital are scarce. I found some discussion in a Reddit forum and, for what it’s worth, most people participating in the discussion there posted positive comments.

In general, then, here are some things people say they like about Shopify Capital:

• Easy Repayment: Having Shopify take repayments off the top of your sales makes it easy to repay your funding at a steady pace.
• Simple Application Process: Shopify already has most of the information it needs already.
• Relatively Inexpensive Financing: As short-term alternative lending goes, Shopify’s rates aren’t bad. And you will see the fees upfront, so you can decide if it’s worth it to you.
• Online Reporting To Keep Track Of Progress: One of the benefits of using an integrated platform is that you can see your ROI in real-time.

As one customer posted, “Used it 6 times … no hidden fees or strings. It’s exactly what it says it is. Support has been solid, and although not the best loan to take, when you’re in a pinch, it’s a huge help.”

Is Shopify Capital The Right Lender For Your Business?

Shopify Capital is certainly worth considering if you are given an offer.

Some people have expressed concerns that Shopify is offering expensive financing through Shopify Capital. As short-term lending goes, Shopify’s rates are actually pretty good although you can expect a more demanding repayment schedule than you might be used to if you decide to accept an offer. Make sure to closely review any offers you receive and get a sense of how much of your sales will be held back to repay your debt. Keep in mind that your repayment amount will be a regular percentage, so when sales are high you can expect to pay down your loan faster, whether you really want to or not.

It’s true that reasonably creditworthy merchants may be able to find less expensive financing elsewhere. However, thanks to a simple application process and automatic daily withdrawals that fluctuate with your cash flow, Shopify merchants will have a difficult time finding a more convenient borrowing solution.

If you’ve decided that Shopify Capital isn’t the right financing option for you, check out our articles on vendor financing to learn about another option that might work better.

Or, if you’re interested in a more traditional way of financing your business growth or funding an emergency expense, check out our list of the best loans for small businesses. With many types of funding available, including bad credit, low interest, fast funding, and crowdfunding, you’re sure to find a funding option that meets your needs.

The Merchant Maverick Seal of Approval 🏆

Shopify Capital	Apply Now

After hours of in-depth research and evaluation, we can confidently recommend this brand to our readers. Get started today and see Shopify Capital for yourself.

The Merchant Maverick Seal of Approval 🏆

Shopify Capital	Apply Now

After hours of in-depth research and evaluation, we can confidently recommend this brand to our readers. Get started today and see Shopify Capital for yourself.

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