Shopify Capital Review: Solution for Small Business
Nearly one-third of small businesses fail due to cash flow problems. This alarming statistic highlights the critical importance of funding for entrepreneurs. While securing financing can be a major challenge, Shopify Capital offers a streamlined solution for businesses operating on the Shopify platform.
ArrowTheme explores Shopify Capital to help you understand this unique funding option in this Shopify Capital Review article!
What is Shopify Capital?
Shopify Capital is a loan service for Shopify merchants in the United States, Canada, and the United Kingdom, introduced in April 2016. However, it is not the same as a traditional small-business loan, in which you repay the loan in monthly installments with interest. Because Shopify buys a share of your future receivables. Therefore, when you make future sales, a portion of the money goes toward repaying your Shopify Capital loan.
Shopify Capital ranges from $200 to USD 1,000,000. In the fourth quarter of 2019, Shopify Capital provided $115.9 million in merchant cash advances and loans, up 61% from the previous quarter. Due to the coronavirus pandemic, many businesses have reported lower lending amounts. The amount of capital supplied to repeat borrowers frequently increases each time.
So now let’s read the Shopify capital review as follows.
Is Shopify Capital a Good Choice?
| Pros | Cons |
| It’s simple. You won’t have to look for these money; if you match Shopify’s initial eligibility standards, you’ll be notified. Because Shopify already has your information, the application is also simple. | It’s not cheap. When compared to other funding choices, Shopify’s repayment plans and interest rates might be costly, especially if your business grows quickly. |
| The repayment process is very easy. Shopify will create a repayment plan for you and remove funds from your linked accounts. As a result, you don’t have to be concerned about missing a payment. | Repayment might be complicated. Because the remittance rate is difficult to understand and fluctuates. So it’s difficult to tell exactly how much you’re borrowing and how much you’ll owe. |
| Even if you have bad credit, you may be eligible. While banks may be more selective in who they lend money to, Shopify already knows you and is more likely to provide cash to firms with a poor credit history. | You’ll lose money in the future. While your projected sales may look good, you’ll have to give up some of your profits until the loan is repaid. |
| Applicants can be pre-qualified immediately. | |
| The application process is simple and quick. |
What Can You Do With Shopify Capital Funds?
During slow periods, use a cushion.
If you run a seasonal business and can’t plan for slow periods (such as the post-holiday slump), it might be difficult to meet operational expenditures during those times, especially if you don’t have a significant cash reserve. Therefore, Shopify Capital funds are an excellent method to give your business a boost as it prepares for the next busy selling season.
More inventory should be purchased.
In an online store, inventory is a costly but necessary asset. You have nothing to sell if you don’t have it. However, inventory acquisition is costly. Here’s where Shopify Capital comes in. These funds might be useful, particularly before a busy period when you need to stock up to satisfy increased demand.
Increase the amount of money you spend on advertising.
Advertising is an important part of advertising your ecommerce store. Therefore, extra money from Shopify Capital can help your campaigns succeed. Although using Shopify Capital to kick-start your ongoing advertising strategy is not a good idea, it can be a useful method to supplement existing efforts and expand their reach.
Make your labels and packaging.
For ecommerce businesses, packaging design and the unboxing experience are important. They build a customer’s first impression of the physical brand experience and allow you to differentiate yourself from the competitors. So you might utilize Shopify Capital to hire a designer to create your product packaging, and then place an order with a custom-branded packaging company.
Invest in a new business.
Launching a new microsite, developing and testing a new product, having a pop-up shop, or constructing a new warehouse are all examples of new ventures. That is dependent on your business.
Shopify Capital’s Services Offered
Merchant cash advances.
Firstly, the funder pays a lump sum for a percentage of your future credit and debit card sales. After that, they keep a percentage of your card-based sales each business day to receive their percentage of the sales. Therefore, you won’t have a predetermined term duration because your sales may fluctuate.
Short-term loans.
Short-term loans provide the borrower with a lump sum payment. Over a fixed length of time, usually less than a year, the borrower repays the loan plus a flat cost. Furthermore, payments are usually divided into equal parts and repaid daily or monthly. However, Shopify approaches things a little differently (see below).
Qualifications of the Borrower
Under certain conditions, Shopify Capital isn’t for everyone. Because for starters, the loan program is only open to approved merchants. So if you don’t meet Shopify’s requirements, you won’t be able to apply.
There are two stages to the screening process. Initially, Shopify will send out invitations to apply by email and a dashboard message. When you apply, Shopify will do additional screenings before accepting and issuing cash.
You must meet the following requirements to be accepted for Shopify Capital:
- Firstly, on Shopify, you may sell your products.
- Secondly, your business has to operate in the United States, Canada, or the United Kingdom.
- Consider yourself to have a low-risk profile.
- Process a minimum amount of sales using Shopify Payments or a third-party payment source, though Shopify does not specify how many.
Terms and Fees of Shopify Capital
| Amount borrowed | $200 – $1 million |
| Term | MCAs have no maturity date STLs have a 12-month term. |
| Factor Rate | 1.1 or 1.13 |
| Origination Fee | None |
| Collateral | None |
How to Apply Shopify Capital?
You can’t apply for Shopify Capital directly. Because the firm will follow your account and then give you an alert if they think you’re suitable. In case you are notified, you will have the option of selecting from several various offers, which will vary depending on the amount borrowed, the remittance rate, and other circumstances.
However, you may receive an alert that informs you that you are ineligible for the offers. Moreover, you may be asked to supply extra information for verification purposes.
The money will be paid to your bank account if you accept the offer made to you following underwriting. According to Shopify, it takes two to five business days from the time you request cash to the time they are approved. Additionally, you will take another day to receive the funds in your account.
Please note that to locate what you’re searching for, you’ll probably have to go through some FAQs. Thus, you will have to get more information about Shopify capital before involving in this process
Conclusion on Shopify Capital Review
Above are some useful information about Shopify Capital Review. Hopefully, that information will help you in your business. However, if you do not understand it or want to know more about it, let’s CONTACT US.
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