In mid-2016, Shopify introduced its Shopify Capital program. It’s a business financing program, and qualified recipients can get up to $1 million in funding for their ecommerce store.
This program has become especially important for retailers since the outbreak of COVID-19. The pandemic has already led to countless businesses shutting down for good, and many others are still struggling to survive.
With an injection of extra funding, a store that’s on the edge of failure very well may be able to weather the storm until sales pick back up. And even for stores that aren’t in desperate need, such funding might be exactly what you need to take the next step and really set yourself apart from your competitors.
Are you interested in getting a Shopify Capital loan for your own store? In this guide, we’ll go over the eligibility requirements, how to get your loan and everything else you need to know.
What is a Shopify Capital Loan?
The Shopify Capital loan is a loan offered through the ecommerce giant to merchants who need funds for their business. Interested participants must qualify and apply for the program.
There are several benefits to using this type of funding over your other alternatives: You’ll receive the funding quickly (requests are approved within two to five days), there’s no lengthy application process and your loan will conveniently be repaid as a percentage of your store’s sales.
Shopify Capital Loan Eligibility Requirements
As of this writing, only Shopify stores based in the following U.S. states can quality for a Shopify Capital loan:
- North Carolina
- South Carolina
Beyond your location, Shopify has additional criteria it uses when deciding which stores the company will offer loans to.
While the exact details regarding Shopify’s eligibility requirements are not publicly available, your sales figures and risk profile (as determined by Shopify Capital’s underwriters) will be taken into account. Also, you’ll need to have either Shopify Payments or a third-party payment provider enabled on your store in order to qualify for a Shopify Capital loan.
How to Get Your Shopify Capital Loan
Only pre-approved stores are able to receive Shopify Capital loans — there’s no way to apply for one unless Shopify has already given you the go-ahead. But even if you haven’t been approved at this point, you still may be approved in the future. Shopify is continuously assessing stores and making new loan offers.
If you have been offered a loan, a message will appear on the homepage of your Shopify admin dashboard. You’ll also be sent an email notification about the offer.
Your offer will be in the form of three funding options, which can range between $200 to $1 million. Each option will describe the amount you receive, the total you will owe after fees and the daily repayment rate that will be deducted from your sales (more on that below).
The offer will generally be valid for 30 days, but keep in mind that the amounts you’ve initially been pre-approved for can be increased, decreased or even revoked at any time.
Once the offer expires, you may see the funding options of a new offer replace the options of the expired offer. But if you’re not pre-approved for a new offer, you will no longer see any funding options displayed.
You can also access the funding options that are currently available to you by going to “Settings” > “Capital” from your admin dashboard and selecting the “View funding offers” option.
To request your loan, simply click on the “Request [amount]” button below the funding option you want. Then, review the popup that details the terms of your application and select “Accept terms.”
After accepting the terms, you’ll just need to add your bank details and review your information one more time to finalize your request.
Your request will then be manually reviewed by the Shopify Capital team. The pre-approved funding options were just the first stage of the underwriting process — now, Shopify may decide to adjust your loan amount or decline the request altogether.
If there's an adjustment, you'll get a chance to review the changes and decide whether you want to continue with the loan or not.
How Shopify Capital Loans Work
As we mentioned earlier, you’ll know whether your request is approved within two to five business days. If it's approved, you’ll receive the loan amount as one lump sum deposited into your bank account, and this could come in as soon as the next business day.
Your total owed is the loan amount plus the fixed borrowing cost, and this will need to be paid back within 12 months. A percentage of your daily sales (also known as the repayment rate) will automatically be sent to Shopify Capital until you’ve completely paid off your total owed — these automatic payments will kick in two days after you receive your loan amount.
The 12-month term of your loan will be broken up into a series of six 60-day repayment cycles, which are called milestones. Each milestone has a minimum payback amount that’s one-sixth of the total owed. If you don’t meet the minimum payback amount for a milestone, the difference between the amount that you did pay off and the minimum payback amount will be charged to your bank account.
For example, let’s say you secured a $2,000 loan with a fixed borrowing cost of $200, making the total owed $2,200. Also, you have a repayment rate of 14%. In that case, your milestones would have a minimum payback amount of $366.67, and 14% of your sales revenue would be sent to Shopify Capital until your total owed is paid off. And if you had only paid off $200 through the 14% cut of your sales revenue at the end of one of your milestones, $166.67 would be charged to your bank account in order to meet the minimum payback amount.
You can manually pay off some or all of your loan at any time by following these steps:
- From your Shopify admin dashboard, go to “Settings” > “Capital.”
- Select “Make a payment.”
- To partially pay off your loan, enter an amount in the “Custom amount” field (the amount must be over $20 to be accepted). To completely pay off your loan, select “Full remaining balance.”
- Select “Next step,” confirm that the correct amount is displayed and then select “Make a payment.”
The “Settings” > “Capital” page is also where you can keep track of all the information regarding your loan, such as:
- The remaining balance you owe.
- The total amount you have repaid.
- Your history of repayments (in this section of the report, your daily sales revenue will be displayed in the “Total sales” column and the amount that is taken out each day to repay your loan will be displayed in the “Amount” column.
Note: If you’re using Shopify Payments when you receive your loan amount, you won’t be able to deactivate Shopify Payments until you’ve completely paid off the total amount owed.
You can change the bank account that’s used for Shopify Capital by going to “Settings” > “Payment providers.” This will change the account that’s used for both your Shopify Capital deposits and your Shopify Payments withdrawals (there’s no way to use separate accounts for these functions). If you do change your account, any withdrawals that were already scheduled will be taken from the old account.
And one last point — on the homepage of your Shopify dashboard, you may see a message prompting you to authenticate your bank account. We recommend that you go ahead and do this, as it can help you qualify for higher loan amounts and lower fixed borrowing costs.
Shopify Capital Loan Success Stories
So, how have Shopify businesses that took on business financing fared?
A few years ago, the fashion store Pop Up Plus had a problem. After being featured in a popular wedding magazine, there wasn’t enough inventory to keep up with all the new orders. But on the very same day that the magazine feature was published, Pop Up Plus received an offer for a Shopify Plus loan, which allowed the store to put in a big enough order to its wholesaler to match the increased demand.
“Shopify Capital was the life line my business needed this summer,” said Pop Up Plus owner Camille Newton in an interview with Shopify.
Another example of this program in action: All Things Real Estate. The real estate supply store used a Shopify Capital loan to move into a bigger office space. The funding also gave these merchants the security they needed to weather slow sales months as they grew their business.
“A bank loan felt cumbersome, and more restrictive. Shopify Capital has a different mentality to it,” said founder Tracey Hicks in her Shopify interview. “Shopify is a company we’re used to working with — they already know our business and can see how we’re doing without us filling in a bunch of forms. That’s why they can more easily offer us the money.”
A Shopify Capital Loan Could be Right for You
As Pop Up Plus and All Things Real Estate have shown, you can use a Shopify Capital loan to solve a variety of business problems.
Do your research and see if this funding option makes sense for you — this program just might be the key to your online store’s success.