More than one million ecommerce businesses in 175 countries use Shopify to reach hundreds of millions of customers.
In mid-2016, Shopify introduced Shopify Capital, a small business financing program where qualified recipients can receive up to $1 million in funding for their ecommerce stores.
With an injection of extra capital, new stores can gain a head start, growing stores can scale faster, and even established merchants can qualify for the funding to set themselves apart from competitors.
In this article, we’ll go over:
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Shopify Capital is a financing program created to give qualified sellers fast access to business loans and merchant cash advances.
It’s offered on an invitation-only basis—if eligible, interested participants can apply after getting their invite.
The Shopify Capital program showcases three financing use cases:
This type of funding brings several benefits compared to the alternatives:
Shopify Capital is a superb option if you need additional small business funding to scale your operations.
The three use cases of financing Shopify Capital offers hints at where you might implement additional funding for your business.
However, there are other ways you can leverage more capital to elevate your brand and operations.
With proper funding, you can build your ideal team by bringing in new people or expanding existing roles.
You can also hire expert contractors or freelancers if you’re working on specific projects for your business.
For example, a team of freelance marketers or an in-house growth team can improve customer acquisition, retention, and revenue by optimizing your products and exploring different channels.
Additional funding can also refine and polish your brand.
For example, you can hire designers to make your branding more recognizable across multiple platforms like LinkedIn, Twitter, and your own website.
You can produce more brand assets, ensure all your creatives are instantly recognizable and align with your brand, and update your website’s UX design to deliver a better customer experience.
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Advertising is critical in ecommerce, but it can be expensive.
Access to financial resources opens up new opportunities to conduct campaigns and promote your brand to the right people.
Costs per click (CPC) have been rising, and competition is fierce.
Lacking an adequate ad budget can result in wasted efforts if your ads miss the mark or you advertise in the wrong places.
With enough funding, you can hone your ad strategy. For example:
Stocking products is a key contributor to business growth.
Sometimes merchant sales are limited to how much inventory they can afford at one time. Think about products that sell out due to popular demand and then have a waiting list because brands couldn’t afford to order enough.
Other brands might have a longer gap between sales and payment.
For example, if you offer custom-made jewelry and don’t charge the full amount upfront, you may need more funding to stay in stock while creating and delivering your current orders.
With Shopify Capital, you can purchase the right amount of stock regularly to streamline inventory management and fuel your growth.
It allows you to:
With your Shopify funding, you can:
Having sufficient capital allows you to conduct research and development, which can reveal new products, SKUs, and services to add.
These additions bring significant benefits:
Once you expand your catalog and start to grow, you may need to outsource fulfillment (after all, merchants don’t get into ecommerce to become warehouse managers).
With your Shopify Capital funding, you can easily get your products into fulfillment centers to satisfy your customers’ demands.
Shopify’s powerful apps also let you:
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Shopify Capital is an invite-only program.
Shopify will notify you if you’re eligible to apply for Shopify Capital funding through email and a message on your admin’s homepage. This message invites you to view your available funding options.
Tip: Even if you haven’t been approved, you could be in the future. Shopify continuously assesses stores and makes new loan offers.
As of this writing, only Shopify stores based in the following US states can qualify for a Shopify Capital loan:
Shopify has specific criteria to decide which stores they’ll offer loans to.
While the exact details of the company’s eligibility requirements are not publicly available, your sales figures and risk profile (as determined by Shopify Capital’s underwriters) are taken into account.
You’ll also need to have either Shopify Payments, or a third-party payment provider enabled on your store to qualify for a Shopify Capital loan.
Here’s a quick overview of what you’ll need to qualify:
Shopify doesn’t define what they consider a “low-risk” business, but your industry and sales history likely influence that determination.
They also fail to disclose the volume of sales your business must process to qualify but clarify that they frequently track seller accounts.
Based on the above information, having a Shopify store that shows a consistent growth in sales makes you more likely to qualify for funding while experiencing seasonal spikes in sales doesn’t.
However, being ineligible now doesn’t preclude you from qualifying in the future.
If you receive an eligibility notification and invite from Shopify, you can easily view the available funding options and request your loan by following these steps:
1. From your Shopify dashboard, go to Settings > Capital.
2. Click View funding offers.
3. Shopify will present you with three funding options. Compare their terms* and click Request beneath the one you want.
4. In the Review loan terms and submit your application dialogue, click Merchant Loan Agreement to open it in another browser tab.
5. Review the terms of the Merchant Loan Agreement, then go back to the Review loan terms and submit your application dialogue.
6. After that, click Submit application and you’re good to go.
*The terms of each funding option will include the following:
Once you submit your application, Shopify will review it.
You’ll typically receive a response within one to three business days. Your loan will be delivered to your business bank account if your application is approved.
After receiving it, Shopify Capital will begin debiting the daily repayment from your account within two business days.
Here are some other details you should know:
Your repayments will be a percentage of your daily sales until the end of a 12-month period.
Shopify divides this term into six 60-day milestones. You’re expected to meet a minimum payback amount at the end of each milestone.
If you fail to pay the margin, it’ll be deducted from your account.
The borrowing fee is variable, and Shopify doesn’t disclose how they calculate it. Based on anecdotal evidence, we can see that it’s typically around 10% of the total fee of the full loan amount.
Let’s say they gave you $2,000 with a borrowing fee of $200 (which is 10% of your total loan amount), and a repayment rate of 10%. Every day, 10% of your sales will go toward repaying this loan until you clear the total amount of $2,200 at the end of the 12-month term.
You’ll also be expected to repay at least $333.32 (one-sixth of the total owed) at the end of each milestone.
For instance, if you only repaid $150 at the end of the first milestone, the remaining $183.32 will be subtracted from your account.
You can either repay any amount over $20 or the total remaining balance in one lump sum.
It will then be debited from the same business bank account associated with your Shopify account. Simply follow these steps:
1. Go to Settings > Capital from your Shopify admin.
2. Click Make a payment.
3. Choose the amount you want to pay:
4. After that, click Next step to review the amount to be repaid.
5. Lastly, click Make a payment.
Once your repayment is complete, you’ll receive a confirmation from Shopify.
Shopify offers another type of financing called a merchant cash advance.
This business cash advance is a lump sum of money you can receive for a fixed borrowing cost.
This fee is situational, and Shopify doesn’t disclose exact percentages. Its rate and total remittance depend on your risk profile.
The merchant cash advance shares similarities with a Shopify Capital loan:
However, there are no payment milestones nor a fixed term, making it more flexible than a Shopify Capital loan.
Shopify will keep deducting your repayments until the whole advance and fee are fully repaid.
Let’s say Shopify offers you a $2,000 merchant cash advance with a borrowing fee of $200 and a repayment rate of 10%.
This means 10% of your daily Shopify sales will go toward repaying your merchant cash advance until you’ve cleared your total owed amount of $2,200.
Nothing will be deducted from your bank account on days when you don’t make a sale.
This makes it more flexible and safer for your business—as long as you earn sales revenue, you can repay your loan.
If you received an eligibility message, applying for a merchant cash advance is similar to that of a Shopify Capital loan:
1. Go to Settings > Capital from your Shopify admin page.
2. Click View funding offers.
3. Compare the terms* of the available funding options, then click Request beneath the one you want.
4. Review the Terms and conditions section in the Review and accept terms dialogue, then click Shopify Capital Agreement to open it in another browser tab.
5. Review the Shopify Capital Agreement and the Pre-authorized debit agreement.
6. After that, go back to the Review and accept terms dialogue and click Accept terms.
*The terms of each funding option will include the following:
Shopify Capital will review your request and send you a response within two to five business days. Your merchant cash advance will be deposited into your business bank account if approved.
Then, Shopify Capital will start to debit your daily payments two days after you receive your merchant cash advance.
Here’s what else you should be aware of:
You can pay your remaining balance in a single lump sum once you’ve remitted at least 25% of your total.
It’s debited from the same business bank account that’s connected to your Shopify account. The process is as follows:
Processing your lump-sum remittance could take up to three business days, and all regular remittances are paused during this period. Once complete, you’ll receive a confirmation email.
Below, we’ll answer some frequently asked questions about Shopify Capital.
No, you can’t negotiate your pre-qualified Shopify loan amounts.
However, once you’re approved, Shopify will provide three different pre-approved loan amounts. You may choose between these amounts to get the best loan suited to your needs.
You can expect your Shopify Capital funding to total anywhere between $200 and $1 million.
This is in exchange for a set amount of your future sales revenue, which serves as repayment. You’ll also have to repay the advance, plus a borrowing fee.
Many businesses are taking advantage of this funding avenue: According to Shopify's financial results for the first quarter of 2022, merchants in the US, Canada, and the UK have received $346.7 million in merchant cash advances and loans from Shopify Capital.
Based on the limited information available, Shopify Capital does not affect your credit score.
However, we can’t guarantee this with 100% certainty. It’s best to get in touch with Shopify to clarify the details during your application.
Shopify Capital loans are only available to merchants in the US and Canada. However, Shopify offers Merchant Cash Advances to stores in the UK, as well.
If you’re hesitant about trying Shopify Capital or don’t want to wait to become eligible, here are some alternatives.
These are excellent choices for getting that much-needed funding when you’re unable to apply for a Shopify loan.
Payability offers Shopify seller funding options where amounts range from $10,000 to $250,000. It has an easy application process and doesn’t require credit checks or bank documents.
You can also connect your marketplaces, then the company evaluates your business based on your sales history and account health.
Clearco gives you easy access to marketing and inventory capital funding options.
You simply connect your stores and ad accounts, then the company measures key growth metrics like monthly revenue and ad performance.
You’ll receive three funding offers ranging from $10,000 to $20 million in 48 hours or less.
You only have to pay when you earn revenue, and you choose the percentage of your daily sales that serves as repayment.
SellersFunding provides readily available Working Capital.
You can receive credit limits of up to $5 million, terms of up to 12 months, and your application can be approved in as little as 48 hours. It also has no impact on your credit score.
Create your account, connect your marketplace/s, review and select from the available proposals, and have your funds deposited into your preferred account.
Shopify Capital can be a fantastic solution for financing your business’s needs, whatever its size.
A Shopify loan is easily accessible (to qualifying merchants), flexible, and can provide you with adequate funding for marketing, inventory, or acquiring the right people to help your store grow.
If you’re one of the lucky small business owners who receive that coveted “You’re Eligible” notification, take advantage of the opportunity to grow.
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Rachel is a remote marketing manager with a background in building scalable content engines. She creates content that wins customers for B2B eCommerce companies like MyFBAPrep, Flxpoint, Shogun, and more. In the past, she has scaled organic acquisition efforts for companies like Deliverr, Skubana, and Pipe17.