Shopify Capital Business Loans Review

Pros

• No credit score requirements
• No personal guarantee or collateral
• Easy application and speedy funding
• Direct repayments from sales

Cons

• Available only to Shopify users
• Requires daily repayments as a percentage of sales
• Not easy to directly apply

What Is Shopify Capital?

Shopify Capital is a merchant cash advance and loan program that offers funding to eligible businesses selling on the Shopify eCommerce platform. All products are issued through WebBank in the US.

Shopify Capital promises to connect Shopify sellers with fast and easy nontraditional small business loans. Can Shopify Capital deliver? How much will it cost to access a small business loan through Shopify Capital?

And how does Shopify Capital stack up against the best small business loans?

Services Offered By Shopify Capital

Shopify Capital offers short-term business funding in the form of merchant cash advances and short-term loans. Shopify’s terminology gets a little confusing because it offers two forms of short-term loans: one which functions similarly to a merchant cash advance (just called a Shopify Capital loan), while the other has a more regular weekly or monthly repayment schedule (which Shopify calls “term loans”).

Shopify now also offers revolving lines of credit. A line of credit allows you to borrow against an established credit limit, paying interest only on the amount you’ve used.

Shopify Capital already offered high borrowing amounts that could be conveniently repaid through its existing infrastructure, but with the addition of lines of credit, it’s now a pretty well-rounded lender. We give Shopify Capital a 4.2/5 for services.

How Shopify Capital Merchant Cash Advances & Shopify Capital Loans Works

When you accept funding from Shopify Capital, Shopify buys a percentage of your future sales for a lump sum.

You will repay the amount of your advance or loan plus a fixed amount fee.

Shopify will collect a percentage of the sales each business day by holding back a portion of your credit and debit card sales. That percentage is known as a withholding or remittance rate, and it’s typically set at 10% with Shopify Capital.

You won’t have a set term length or a fixed payment amount. Because your sales may ebb and flow, Shopify will continue collecting its percentage until the funding amount and added fees are fully repaid.

You can make a lump sum payment to pay off your loan or advance, but your remittance rate will not change.

Shopify Capital Borrower Qualifications

Because Shopify already has access to information about its users’ business and revenue, applying for funding may be quicker and easier than with other financing options available to you. This can take a lot of the guesswork out of knowing whether you qualify for a loan.

Shopify is, at least on paper, quite lenient in terms of minimum time in business, credit score, and business revenue requirements, which adds up to a 4.7/5 in this category.

Although you can request funding from Shopify Capital, be aware that Shopify will be monitoring your account and will alert you if you become eligible. If you haven’t received an offer yet, that probably means you are not eligible.

Note that Shopify funding is available only in a few countries. Loans are only available for Australian and Canadian merchants. Cash advances may be available to merchants in the UK. In the US, you may be eligible for both loans and advances.

Before qualifying for Shopify Capital, you must sell on Shopify for at least 90 days. Other than that requirement, 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 need to:

• Have a profile that is considered low-risk
• Comply with Shopify’s acceptable use policy and terms of service
• Demonstrate consistent sales
• Have Shopify Payments or another third-party payment provider enabled

Note: Shopify does not say directly but implies that merchants using Shopify Payments may have a slight advantage. 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.

Only store owners are eligible to apply.

Shopify Capital Terms & Fees

Shopify Capital evaluates your creditworthiness based on the status and success of your Shopify store. No personal guarantee, collateral, or minimum credit score is required. Shopify Capital’s rates are, reportedly, quite reasonable, but it would be better if they were disclosed publicly. Just as importantly, you won’t be stuck with additional account fees beyond what you’re already paying for your Shopify account.

Repayment terms are on the short side, so make sure you’re prepared to rapidly repay what you borrow. We rate Shopify Capital 3.9/5 for rates and fees.

These are the terms and fees for Shopify Capital’s lending products.

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

Here’s how that 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.

Although the company no longer publicly discloses the factor rate outside the application process, in the past, it has been either 1.11 or 1.13. So if you borrow $10,000, Shopify would collect a total of either $11,000 ($10,000 x 1.1) or $11,300 ($10,000 x 1.13).

Repaying Shopify Capital Loans & Cash Advances

Instead of paying a fixed sum each day or month, Shopify collects 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 could 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 (loan or advance total + fees) has been collected. However, your loan must be paid back within 18 months.

It’s important to understand that this repayment rate stays at a fixed percentage regardless of how your sales go up or down. On a slow day with $100 in sales, you would repay $10. On a high-volume day with $10,000 in sales, you would repay $1,000.

Repaying Shopify Term Loans

Shopify’s term loans are repaid on a set weekly or monthly schedule, with the amount owed broken into even payments based on the term length of the loan. Payments are automatically debited from your connected bank account.

Repaying Shopify Lines Of Credit

Shopify’s lines of credit are repaid monthly during the six months following your withdrawal, with the first principal payment due a month after your withdrawal. If you draw on your credit line again before your previous repayment is complete, the balances are combined and re-amortized.

Shopify Capital lines of credit have no set expiration date and are instead subject to periodic review.

How Does Shopify Capital Compare?

Although especially creditworthy borrowers might be able to find better rates elsewhere, Shopify Capital’s rates and fees are relatively competitive with similar funders.

Shopify Capital Application Process

In general, you don’t directly apply for Shopify Capital — the company monitors your account and sends an alert by email and in-app when it thinks you’re eligible. Advertising for Shopify Capital instructs store owners to log in to see what offers are available for them.

Most users will be able to choose from a few different offers that 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. The underwriters may find that you are, in fact, 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. You may also have to provide additional information for verification purposes.

If you accept the offer presented to you after underwriting, the money will be sent to your bank account. Shopify says you can receive the funds within as little as two days. If you switch your payment provider to Shopify Payments at the same time, however, approval might take a little longer.

Shopify Capital’s application process is mostly passive, but not exactly transparent, which can lead to some confusion. Time to funding is quick, though not notably so. These factors add up to a 3.3/5 rating in this category.

Shopify Capital Sales & Advertising Transparency

Most of the information you need to know about Shopify Capital is there, but you’ll have to work a little harder to find it. Some information is available only when you view your lending offers.

Although the wording can be a little confusing, 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 or use the chatbot to find what you’re looking for. You’ll find some lending examples with repayment rates illustrated to give you some clarity.

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 an undisclosed formula to decide whether or not you qualify for funding and for how much. There’s not much you can do other than accept or decline what’s offered to you, which makes the advertising of the products seem somewhat superfluous beyond telling you that they exist. We rate Shopify Capital 3.4/5 for transparency.

Shopify Capital Customer Service & Technical Support

Shopify’s customer service is either exemplary or unhelpful, depending on whom you ask. From my own experience, I have received informed, helpful answers with minimal wait time. I’ve also done well navigating the help center and using the chatbot to find the information I need. Your experience may be different.

What’s indisputable is that Shopify offers a lot of options. Customer service is available via phone, email, and chat. Phone support is available 24/7.

You may also be able to find an answer to your problem on Shopify’s help center and in the community forum. We rate Shopify Capital 4 out of 5 stars for customer service and support.

Shopify Capital User Reviews

It’s hard to find customer reviews for Shopify Capital as a distinct entity from the broader Shopify platform. Some people have expressed their hesitation about this funding, but reactions from customers who have 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 Better Business Bureau, with 624 complaints on file and no recent complaints that are related to loans. I appreciated that Shopify reps seem to be very responsive to customer complaints on the BBB website.

Filtering out the signal from the noise, we found Shopify Capital to get mixed reviews from users, which we’ve quantified with a rating of 2.7/5.

Negative Shopify Capital Reviews & Complaints

A few criticisms did emerge from the general Shopify comments users post online. I spotted some funding-specific complaints in the Shopify user forum and other online forums. Here’s a sampling:

• Expensive Lending: While Shopify Capital rates are pretty good within their class, they can be expensive relative to a bank loan.
• Improperly Frozen Accounts: Some users say they’ve inadvertently run afoul of some Shopify rules that caused the platform to lock them out of their accounts.
• 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. Even worse, offers made to you may be rescinded or reduced after underwriting gets involved. And several users on the Shopify forum complain that they aren’t receiving additional loan offers even after repaying their original loans.
• Confusing Rates: Because Shopify uses factor rates instead of advertising an interest rate, it’s difficult to understand the cost of borrowing. To ensure you fully understand the cost of Shopify funding, look into cash advance APRs before accepting funds.

Positive Shopify Capital Reviews & Testimonials

Again, independent customer reviews that focus exclusively on Shopify Capital are scarce. I found some discussion in several Reddit forums and saw many positive comments.

In general, 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.
• No Hidden Fees: Once you’re offered credit, you will see the fees upfront, so you can decide if it’s worth it to you.
• Fast Funding When You Need It: Despite some drawbacks, Shopify Capital can provide much-needed funds in a pinch. And once you’re approved, you’ll have access to the money within a couple of days.

Notably, many of the positive comments also included acknowledgment of certain known drawbacks, especially the high cost of borrowing via Shopify Capital when compared to traditional lending.

Is Shopify Capital Worth It?

Shopify Capital is certainly worth considering if you are given an offer. It’s fast funding that can help you out of a rough patch.

Some people express concern that Shopify offers expensive financing through Shopify Capital. Overall, compared to some of the best business lines of credit, we feel that Shopify Capital has a lower cost of borrowing than some other offers and easier qualifications, too.

However, if you’re looking for a less expensive short-term business loan, Shopify Capital won’t be your best option. Although the application and funding processes are slower than with Shopify Capital, take a look at SBA loans from the Small Business Association and you’ll find much lower interest rates.

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. We give Shopify Capital an overall Merchant Maverick rating of 3.9 out of 5.

Business Loan & Funding Products Review Methodology

Merchant Maverick has been researching and reviewing business lenders since 2015. Our writers have tested over a hundred different funding products, including traditional term loans, online loans, lines of credit, start-up loans, merchant cash advances, and equipment financing. In each review, we evaluate rates and fees, services, eligibility requirements, application process, sales and advertising transparency, customer service, and user reviews.

Read more about how we rate business loans and funding products.

When comparing different lenders and loan products, we consider many data points, including the ease and transparency of the application process, interest rates, repayment structure, sales ethics, time to funding, revenue and time in business qualifications, and credit score requirements. Our lists of the best funding products include only those we’ve deemed worthwhile from multiple vantage points, and often share qualities such as widespread accessibility across fifty states, low rates, flexible requirements, and competitive borrowing amounts.

We spend an average of 10-15 hours researching and updating each one of our lists, making sure the loans and funding products included meet our internal standards for quality and reputation.

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.