What if we told you that easy access to numerous growth opportunities is possible? Looking to buy more inventory, do it; run marketing campaigns; buy a brick-and-mortar store; do it! How? With Shopify Capital! Shopify Capital is a well-known internal financing option created by Shopify for Shopify merchants with stores of all sizes!

What’s new is that in Shopify Editions Winter 24, Shopify Capital has recently received several significant upgrades. This blog post discusses how Shopify merchants can use Shopify Capital to obtain funds, invest in business expansion, and simplify their financial management procedures. Moreover, we will also explore exciting new updates to Shopify Capital, released in Shopify Editions Winter 24.

For those who are unaware of Shopify Capital, let’s start with the basics!

What is Shopify Capital?

For Shopify merchants, Shopify Capital acts as an invaluable funding option, offering loans and merchant cash advances to eligible Shopify merchants. This money acts as crucial startup capital for businesses, enabling them to grow their operations, make investments in fresh stock, start marketing campaigns, rent actual storefronts, or recruit more employees.

Shopify Capital is offered in select countries, including Australia, Canada, the United Kingdom, and the United States. Shopify merchants in these areas are eligible to receive funding of up to $5 million. However, the funding eligibility is determined by several variables, including the location, history, and duration of the e-commerce store being with Shopify. Offers to apply for financing are made to merchants who qualify; these offers are accessible through the Capital tab of the Shopify admin dashboard.

Further on in the blog, you’ll learn more about the requirements for eligibility and analyze the advantages of Shopify Capital for your Shopify business.

Shopify Capital Funding Options

Shopify Capital Loans offer financing for businesses in a manner matching traditional bank loans. A factor rate is used to determine the fixed payments that borrowers make over time until the loan amount plus costs are paid back. Repayment is divided into six 60-day cycles, with a normal 12-month term that is based on a percentage of daily revenue. Shopify takes the amount owed from the account if a milestone payment is not made on time.

For instance, to repay a $1000 loan with a $100 fee, 10% of income must be paid each day until $1100 is paid back in 12 months. A minimum payment of 1/6 of the total must be made every 60 days.

Shopify Capital Merchant Cash Advances function similarly, but repayment is based solely on daily sales, offering more flexibility than loans. Repayment continues until the total amount is repaid, with no fixed 12-month term. Cash advances are available only in Canada and the US.

For instance, a $1000 cash advance with a $100 fee requires daily payments equal to 10% of revenue until $1100 is repaid, with the option to pay off the remaining balance after repaying more than 25% of the total debt.

Overall, Shopify Capital provides valuable business funding options, but eligibility varies.

Shopify Capital Eligibility Criteria

The following are general eligibility criteria that Shopify prefers:

You must be the store's owner and a registered user.

You must be located in Australia, the U.K., the U.S., or Canada.

It is required to use Shopify Payments or another third-party payment processor.

The company's risk profile ought to be low. This suggests that fraud protection for your Shopify store is necessary. Regretfully, Shopify does not specify the standards it uses to evaluate businesses in its business profile.

You must have a consistent sales history. This is the main factor that Shopify looks at when determining if a business is eligible. If you have a stronger ability to repay debt and if your business maintains steady sales with no significant revenue drops, then you have a better chance of being eligible for Shopify Capital funding.

The underwriting procedure plays a critical role in establishing eligibility and pre-qualified funding limit for Shopify merchants looking for finance through Shopify Capital. Your past sales activity on Shopify and your general platform engagement are the main factors used to determine your eligibility. Your corporate credit history may be evaluated as part of the assessment, even though a personal credit check is not required in all circumstances.

The procedure takes into account several variables, including past sales figures, payment disputes, Shopify engagement indicators (such as buyer interaction and store activity), and unsuccessful billing attempts. You won't be contacted to apply for funding through Shopify Capital if your store is found to be ineligible. In contrast, you will be alerted by email and on your Shopify admin's home page if you are eligible.

There are two steps in the underwriting process:

Determine pre-qualification eligibility for funding applications.

Examine your store's application to see if the Shopify Capital team can fund the proposed amount.

Shopify Capital has the right to adjust the pre-qualified amounts to reflect your eligibility in the second stage if your store isn't qualified for the requested funding amount.

During the second step, you will be notified whether your financing request is denied. You will, however, have the chance to review your possibilities for funding and submit another application if your store qualifies in the future.

How does Shopify Capital work?

We’re now going to break down the procedure by which Shopify Capital provides merchants with the capital they require to expand their businesses:

Prequalify for funding: Your sales history on Shopify and your level of involvement with the platform will determine if you are eligible for Shopify Capital funding requests and the prequalified amount. When requesting funding through Shopify Capital, a personal credit check is not necessary; however, your company's credit history may be examined in some circumstances.

Obtain offers: You will receive three personalized offers if your company is eligible for Shopify Capital. These are normally 3 offers, along with a fixed loan cost and a remittance rate of 10%. Make sure to carefully check the terms and conditions, including the funding amount, payout rules, and fixed costs. Notifications will reach you via email and a notification on your admin home page.

Apply for funding: Once you prequalify, you must then fill out an online application to be considered for funding through Shopify Capital.

Get the Funds: If your application is accepted, the funds will be deposited into your bank account in as little as two days and credited to your Shopify account right away. Do note that if you do not accept the offer from Shopify within 30 days of receiving it, the invitation will be revoked immediately.

Return the funds: Shopify makes it easier to return a loan or cash advance by deducting a certain percentage from your daily sales. The steps below must be followed to repay Shopify Capital loans:

• Step 1: Go to Shopify's admin page. Choose Settings > Choose Capital.
• Step 2: Choose Payment from the Capital section.
• Step 3: Type in the desired payment amount under Payment. You have the option of paying the entire amount owed on your account or a specific sum.
• Step 4: To confirm the return amount, click Next Step.
• Step 5: Choose your payment method. Thus, the capital repayment procedure is now complete.

A confirmation email will be sent to you as soon as your repayment is finalized.

Get more capital: Before repaying the money from your current fundraising round, you may be able to extend your credit line. That being said, it might be comforting to know that you won't have to pay back the additional funds before your initial investment is repaid.

Pros and Cons of Shopify Capital

Pros:

Direct Funding: Shopify sends money directly to your account without intermediaries.

Multiple Incentives: Real-time sales determine incentives, with grants up to $5,000,000.

No Credit Score Impact: Unlike bank loans, Shopify doesn't require a credit check or compound interest. Even with a low credit score, businesses can qualify based on low-risk business scores.

Simple Application: Claim completion takes just a few clicks, and Shopify notifies you when eligible.

Fast Funding: Approved Shopify Capital loan requests are funded in as little as 2 days.

Flexible Repayment: Repayment plans are automatically set up through Shopify, with no fixed daily or monthly amounts for cash advances.

Reputable Company: Shopify's professionalism and policies ensure reliable operations.

No Interest Rates or Unreasonable Fees: Shopify Capital does not charge interest or unreasonable loan fees.

Convenience: All loan processes and repayments are managed internally by Shopify, eliminating the need for external resources.

Cons:

Exclusivity: Only Shopify users can access Shopify Capital, limiting options for users of other platforms.

Unclear Eligibility: Shopify's announced criteria, such as sales history and location, leave some merchants unsure of eligibility.

Limited Negotiation: Businesses cannot negotiate loan terms or repayment schedules, adhering to Shopify's requirements.

Daily Revenue Deductions: Repayment through daily revenue deductions can strain finances, especially for emerging businesses.

Short-Term Loans Only: Shopify Capital offers short-term loans, posing challenges for businesses with slow recovery rates. Failure to repay within 12 months may result in additional fees or account restrictions.

Shopify Editions Winter 24 introduced some new features to Shopify capital which provide merchants with ease in securing a loan. Let’s take a dive into them.

Shopify Capital: New Updates Empowering Shopify Merchants in 2024

Shopify Editions Winter ‘24 has unveiled a wave of exciting updates to Shopify Capital. These updates are designed to empower businesses of all sizes. Take a look at the new features and how they can help you scale your Shopify business.

New Loan Options

This is the most significant update, as it introduces term loans and lines of credit. Previously, Shopify Capital offered cash advances with a fixed repayment cost based on your sales volume. Now, merchants can choose between:

Term Loans: This option provides a lump sum of capital repaid over a fixed term (typically 3–24 months) with a set monthly payment. This is ideal for larger investments in inventory, marketing campaigns, or equipment purchases.

Lines of Credit: This offers a flexible revolving credit line that you can draw on as needed. You only pay interest on the amount you use, making it suitable for covering operational costs, managing seasonal fluctuations, or unexpected expenses.

With this enhanced option, Shopify merchants can customize their finances to meet their unique business requirements and expansion goals.

Improvements in Eligibility

We’ve got some great news for small businesses and startups! Shopify Capital has relaxed its eligibility requirements, making loans more accessible to new and growing businesses. It now considers more factors than just historical sales data, while some criteria are still kept confidential. This covers things like interaction metrics, product reviews, and the overall health of the company.

Improved User Experience

Shopify continues to display their commitment to making things easier for merchants and streamlining the funding process with:

Pre-approval: Merchants can now see their pre-qualified loan offers directly within their Shopify admin panel. This eliminates the need for separate applications and provides instant insights into your borrowing potential.

Streamlined Application: The application process for both cash advances and new loan options has been streamlined. Expect a more user-friendly interface and fewer application steps.

Faster fundraising: With Shopify Capital, you may receive authorized funds into your business account more quickly than ever by streamlining the fundraising process.

Shopify Capital is also still dedicated to maintaining transparency. The points below are a good example:

No Guarantees: Shopify Capital does not require personal guarantees from owners, unlike traditional bank loans. This lowers financial risk and safeguards your possessions.

No Unexpected Fees: The terms of repayment are straightforward and transparent. Prepayment fines or additional costs are not present.

Integration with Shopify Analytics: Shopify Capital seamlessly integrates with your Shopify data, allowing for a tailored funding experience based on your business performance.

Benefits for Shopify Merchants

These updates translate to several key advantages for Shopify merchants:

Increased Access to Capital: With new loan options and relaxed eligibility requirements, more merchants can access the funding they need to grow.

Flexible Financing: The ability to choose between cash advances, term loans, and lines of credit allows you to customize your financing to fit your business needs.

Simplified Management: The streamlined application process and integration with Shopify Analytics make accessing and managing your finances easier than ever.

Faster Growth: With readily available capital, you can invest in inventory, marketing initiatives, and other growth strategies, accelerating your business trajectory.

Is Shopify Capital Right for You?

The answer depends on your specific circumstances. Here are some factors to consider:

Growth Stage: Shopify Capital can be a valuable tool for businesses at any stage, from early growth to established brands looking to scale.

Funding Needs: Consider the type and amount of capital you need. Cash advances are ideal for short-term needs, while term loans and lines of credit cater to longer-term investments and operational expenses.

Financial Health: Shopify Capital uses various data points to assess your eligibility. Ensure your store is optimized with positive customer reviews and healthy sales growth.

Getting Started with Shopify Capital

If you're interested in learning more or exploring your funding options, simply navigate to the "Finances" section of your Shopify admin panel and click on "Capital." You'll find pre-qualification information and the option to apply for financing directly within your Shopify dashboard.

In Conclusion

Shopify Capital's new updates signify a significant commitment to empowering Shopify merchants. These changes offer greater access to capital, enhanced flexibility, and a seamless financing experience. Whether you're a new Shopify merchant or a seasoned Shopify business owner, Shopify Capital can be a valuable partner in your journey toward growth and success.