Shopify is widely renowned as one of the most popular eCommerce store builders in the world. With this website-building service, you can create a lucrative presence online, complete with everything you need to generate amazing cash flow.
Shopify users benefit from access to everything from amazing shipping and handling support, advanced checkout systems, and endless plugins to boost store performance. In some circumstances, Shopify can even help you to find the cash you need to get your online store up and running.
Shopify Capital is a concept that first appeared in 2016. Similar to PayPal Capital, or Square Capital, Shopify’s Capital service gives business leaders access to a specific loan amount, based on what the site already knows about that company’s revenue and earning potential.
Because you already provide your store builder with lots of information about your company when you sign up, the application process for Shopify Capital is quick and simple.
Used correctly, companies take advantage of this service to help them launch their company faster, and accomplish crucial goals. So, is Shopify Capital worth it? How much does it really cost, and what can it do for your company?
Our Shopify Capital review will cover all those questions, and more.
What is Shopify Capital?
You don’t have to be a veteran entrepreneur to know that you need either a big bank account, or plenty of funding to start a business.
Even online companies sometimes need some extra revenue to get started. Small business loans are a common necessity for a lot of company owners that need help paying for supplies, stock, and even crucial software.
Shopify Capital delivers this extra financing in the form of a merchant cash advance, or short-term loan. Although there are plenty of other ways to get funding for your company, including applying for a dedicated credit card, or a traditional loan, Shopify Capital does have benefits to offer.
The interest rates from these cash advances are often a lot lower than the ones you might get when applying for a small loan amount from a traditional bank.
Additionally, receiving funding from Shopify means that you can usually benefit from a quick application and fast support for your daily sales.
So, what makes Shopify Capital different from other loans in the United States, and around the world?
In most cases, interest rates for business loans and collateral requests are extremely high. This is usually the case if your business is new, and you don’t have a great credit score for your company yet.
Many Shopify merchants have discovered how difficult it is to get working capital for their store when they haven’t got evidence that their business is profitable yet.
Even if you do manage to get a loan from a bank, you’ll need to follow a strict repayment schedule. There may even be extra fees to consider, depending on your company’s needs.
Shopify Capital makes applying for a cash advance simpler for today’s business owners. There are no processing fees to worry about, no late fines, and no hidden costs.
Another massive bonus? Issues like credit scores and credit ratings won’t stop you from getting the money you need. Shopify looks at your company, assesses its potential, and gives you a flexible way to borrow money and pay it back over time.
Shopify Capital Review: Pros and Cons
Although Shopify Capital offers an excellent way to access extra cash for a lot of business needs, it’s not going to be the right option for everyone.
It’s important to remember that different business leaders have different needs when it comes to loans and capital.
If you’re thinking of getting any kind of loan or cash advance for your company, then it’s important to spend some time weighing up the pros and cons before you get started.
Pros:
- Reputable company: Because your loan or cash advance comes from a reputable company, you know you’re going to get a professional experience.
- Easier to apply: You don’t apply for a Shopify loan yourself. Instead, the company comes to you and tells you what you can borrow. This means that you don’t have to jump through as many hoops for an application. Plus, you don’t always need a great credit score.
- Easy repayment: If you opt for the Shopify Capital merchant cash advance, then there’s no specific amount that you need to repay every day or month. Instead, you just pay a percentage of your earnings to Shopify. No interest rates are required.
- Competitive rates: Shopify is very reasonable with the amounts that it asks businesses to pay back when they’re looking for capital or a cash advance.
- Convenient: If you’re running your store with Shopify, and borrowing money from them too, you can have a lot of your eCommerce environment in the same location.
Cons:
- Only for Shopify users: You need to use Shopify to be able to apply for any loan or cash advance, which is a problem for companies on other eCommerce platforms.
- It can be difficult to know what kind of funding you should go for.
How Does Funding Work with Shopify Capital?
Shopify is all about short-term business funding.
The easiest way to get your money is through a merchant cash advance. This means that you get a lump sum to put towards your business needs from Shopify.
In return, you give the Shopify team a portion of your sales revenue from your online business.
A percentage of your daily sales goes back to Shopify at the agreed remittance rate for your contract, until you pay off everything that you owe.
For instance, Shopify Capital might give you $10,000 when you first launch your business. In return, they may ask you to pay $11,000, which means you pay a remittance rate of 10%.
Compared to other funding options that demand consistent repayments on a regular schedule, a cash advance program like this can be a lot more appealing to a store owner.
Rather than paying a certain amount to Shopify every month, like you would with bank loans, you’d pay 10% of all your sales until you’ve repaid everything you owe.
There’s no deadline for repaying your debt, like there is with most financial institutions. Plus, your daily remittance amount is based on the sales that you make. That means that you never have to pay more than you can afford.
Currently, Shopify Capital is offering funding amounts ranging anywhere from $200, to $1,000,000 USD. However, Shopify will need to examine your business and decide how much you can apply for.
Getting a Shopify Merchant Cash Advance is quite different to getting a Shopify Loans. Loans are paid back according to a set timeline, with pre-agreed repayments.
Who Can Apply for Shopify Capital Support?
If you’re interested in applying for Shopify capital loans, then you’ll need to make sure that you’re eligible according to Shopify’s terms and conditions. Unfortunately, as the Shopify Capital home page tells business owners, not just anyone will be able to successfully apply for a loan.
Rather than making an application and submitting to a credit check, Shopify will approach you if you’re deemed eligible for funding. In other words, you have to wait for Shopify to tell you that you can obtain capital before you can apply.
The only way to know if you’re eligible for funding is to receive a message from Shopify. The Shopify admin will send you an email telling you which pre-qualified amounts you can apply for. If you haven’t had an invite to view funding options, then you can’t get a loan.
Shopify decides who should get funding based on:
- Where their store is located (Canada or the United States)
- How risky your business is (Are you likely to continue making money?)
- Whether you use Shopify Payments, or a third-party payment provider
- How many sales your store processes
Currently, Shopify capital loans are limited only to Shopify stores in US states. On the other hand, Shopify Capital advances are available in all US states, and Canada.
If you do get a message from Shopify saying you can access capital, then your amount will remain valid and available for 30 days.
However, Shopify constantly re-assesses merchants to see whether they might be more or less of a risk.
If your pre-qualified amounts expire, or Shopify revokes them, then you won’t be able to request that amount anymore. If you’re still eligible for any Capital, you’ll be able to see that on your Shopify admin page.
Shopify Capital Review: Requesting Funding
Since it’s Shopify that approaches you when you’re eligible for funding, not the other way around, you’d assume that anyone who applies for a loan would be accepted. However, that’s not always the case.
When you apply for Shopify funding, the admin team will review your application, and may decide to reduce or increase the amount you can apply for. The admin team can also reject your request for funding during the underwriting process.
Although you can’t negotiate your pre-qualified amounts with Shopify, there are options to receive some extra funding in certain cases.
After you’ve successfully applied for funding once, some merchants will be able to apply for more cash. The only way to do this is to wait for Shopify to let you know that you can get more money.
To request a merchant cash advance from Shopify Capital, go into your Shopify admin account, then click on Settings followed by Capital.
- Find your eligibility alert from Shopify, and view your funding offers
- Click Request on the funding option that you’re interested in.
- Make sure you review the terms and conditions of the funding before you continue. You should be able to check the amount you’re going to receive, how much you need to repay in remittance, and so on.
- Click the Shopify Capital Agreement and read through all of the content. At the bottom of the page, you can click Accept Terms.
Once you accept a Capital amount, the Shopify underwriters will check your application. Usually, you’ll hear back from Shopify within about 2-5 business days. If you’re approved for funding, your cash advance will go straight into your business bank account.
One thing to keep in mind is if you switch your payment provider from a company like PayPal to Shopify Payments while requesting funding, it may take longer for Shopify to approve your request.
Shopify Capital Review: Repaying Your Cash Advance
Thanks to the lack of a credit check and a direct application process, getting a Capital advance from Shopify is easy. So, how simple is it to repay what you owe?
The terms and conditions you agreed to when applying for funding should have given you all the information you need to know about how you repay your money.
One of the biggest benefits of a merchant cash advance system is that you don’t need to make a set payment every month.
If you don’t have funds available one month, or your sales aren’t going well, there’s no regular amount of cash that you need to find.
Instead, you make an agreement with Shopify to give them a percentage of whatever you earn. That means if your remittance amount is 10%, then you’d pay $200 on a day when you earn $2000, but only $20 on a day when you earn $200.
Shopify also allows you to check out your repayment history and see how much you have left in your outstanding balance. You can find this information on the Shopify Capital page, within the Shopify Admin page.
The remittance required from Shopify Capital differs depending on how many sales you make. Orders placed in your store when it’s in “test mode” won’t count towards the amount that you owe.
Each day you make sales, a fixed percentage is applied to the sales revenue to calculate how much you owe in remittance. To calculate remittance, Shopify includes every order marked as paid on your store every day.
Sales apply regardless of where the order came from, how the payment was processed, or whether the order was cancelled or refunded later. The only orders excluded are those placed when Shopify Payments is in its “test mode”.
Shopify Capital Review: Repayment Fees and Expenses
One of the most important things to note about Shopify Capital is that the merchant cash advance isn’t a loan. You don’t have an interest rate to pay. Instead, you sell an agreed amount of any future sales you might make to Shopify and send a percentage of your revenue to Shopify every day as a result.
There’s no timeframe or deadline for how long you have to return the amount you owe to Shopify Capital. You simply continue to make the payments out of the money that you earn until you’ve paid off everything. This means that you’re not under any pressure to make a certain amount of sales in a specific time frame.
If you choose the short term loan that Shopify offers for small business owners, instead of the merchant cash advance, then the only major difference is that you need to stick to a specific repayment amount.
There are 60 day milestones that you need to adhere to, whereas if you have a cash advance, there are no milestones for small business owners to stick to.
Shopify Capital offers an easy way to access money without overwhelming interest rates and extra fees. The lack of a set repayment date with the merchant cash advance is a huge benefit.
However, it might be worth considering other financing options for some companies. A loan may be the best choice for some service provider companies and retailers.
Shopify Capital Review: Customer Service
Shopify Capital offers a straightforward way for companies to access the money that they need to launch and grow. However, the option to choose between loans and merchant cash advance solutions can lead to some confusion for certain companies. It’s best to take some time reading up on the kind of loans you can get before you get involved or start building storefronts.
The good news is that you do feel a little too overwhelmed, then there are ways to get some help. Customer service is available via email, phone, or live chat. There’s also phone support available on a 24/7 basis. However, sometimes you might not get the answers that you’re looking for straight away.
The reviews that people provide for Shopify Capital and its customer service often differ. Although a lot of customers are happy with the experience they get, some say that the experience is often frustrating. Some representatives seem to follow a script rather than delivering custom support. This leads to the same kind of frustrating experience you’d get from Amazon or eBay in places.
One positive thing is that Shopify does have an extensive community where you can turn for extra help if the company itself can’t support you. There’s a robust knowledgebase, with a bunch of articles to help you start your business. There isn’t as much information from Shopify about Capital as there is about developing a business. However, you can find answers to a few questions here.
Why Would Small Companies Use Shopify Capital?
There are a lot of business loans and financing options available out there for businesses and companies. However, as a small business owner, it’s not always easy to get the capital that you need. Often, banks and traditional lenders want to see proof that you’re going to be able to make a consistent profit before they’re willing to hand over any cash.
Applying for a traditional loan can be a long and drawn-out process that requires a person or their company to have a solid credit rating. If you’re running a business that’s a separate legal entity to you, things get even more complicated, as that company needs a good credit score too.
Banks are frequently reluctant to provide companies with small business loans too. That’s because there’s a lot of complicated vetting that needs to take place before a loan is approved. Ultimately, traditional loans are rarely the best way to get extra cash. Unfortunately, most companies just wont have enough money available to launch on their own.
Programs delivered by eCommerce platforms like Shopify could be a valuable alternative to funding when you’re out of ideas. Whether you’re trying to respond to the stress of operating after COVID-19, or you just want to get your organization up and running for the first time, these programs are helpful.
Not only does Shopify offer a simpler product than most banks because it’s online, there are a lot of other major benefits too. The application process is often quick and simple because Shopify can use information about your company to decide how much you should be able to lend. At the same time, there are no deadlines or minimum repayments to worry about.
Alternatives to Shopify Capital
If you aren’t a Shopify user, and you don’t want to switch your website over to Shopify, there are still some alternative ways of earning capital from other providers. PayPal and Square are the two most popular choices here.
PayPal Capital
PayPal provides small business funding for a fixed fee, similar to Shopify. If you use PayPal services to take credit and debit card payments on your website, then you should be able to get an advance. PayPal notes that approval and the amount of money you can borrow will depend on your sales. This means that you don’t have to worry about credit checks.
Like with Shopify, you don’t have to panic about making consistent payments every week or month. Instead, PayPal directly deducts the portion you owe each month from your sales. Every 90 days or so, you give PayPal a minimum of 10% of your earnings.
You need to make sure that you’re adhering to these rules and paying at least 10% of the total loan value every three months.
If you’re approved to get Capital from PayPal, then you can get up to around 18% of your yearly sales transactions as a loan.
The fees that you pay will be determined by the amount of the loan, the percentage of the daily sales, and the sales history. You can also make manual payments and may need to depending on how quickly you’re paying off what you owe.
Square Capital
Like PayPal, Square is a tool that helps businesses to collect money from clients and customers both online and offline.
The company is well-known for it’s excellent services and it’s point of sale equipment. If you need to run an online store with offline elements, like pop-up shops, then Square has you covered.
The services that Square offers are very similar to Shopify and PayPal.
In the same vein, Square’s Capital solutions are similar to those offered by PayPal and Shopify too. Any company that uses the transaction service or POS service offered by Square can participate in the Capital program.
Like Shopify, Square will assess your company and offer you a loan that’s based on the number of sales transactions that you handle through Square.
There’s a single flat fee, and the funds that you can access are available within around a day of you being approved for the loan.
This makes it easier to get the money that you need fast. Similar to Shopify, sellers who are eligible for a loan will be notified through an email, or in their admin account.
You’ll have a variety of loan amounts that you can select from, depending on what you need for your business.
The amount that you need to pay on the flat fee is dependent on a number of things. Your fee and your percentage of sales going to Square will depend on the loan amount.
It’s worth noting that unlike PayPal and Shopify, Square does pay a lot more attention to your credit rating when deciding how much money you should get. This might mean that applying for an advance or loan from Square is tougher than it is with Shopify.
Shopify Capital Review: Finishing Thoughts
Shopify Capital is definitely something that’s worth giving some thought to.
If you successfully get an offer from the company, then Shopify Capital can give you a convenient way to borrow some money fast, then pay back what you owe without any stress or pressure.
However, it’s worth keeping in mind that any loan or merchant cash advance comes with some risk.
If you have good credit, or your business is already accomplishing good things, then you might be able to find the loans that you need elsewhere.
If you don’t have the best credit, or you’re worried about a complex application process, then Shopify is likely to be the better option.
Good luck with your Capital!
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