As an ecommerce business owner, you know that having access to working capital is crucial for growing your business.
Whether you're looking to invest in inventory, expand your product line, or launch a new marketing campaign, having access to funding can help you achieve your business goals faster.
But is a Shopify business loan the right fit for your business?
In this article, we'll cover everything you need to know about it.
We'll review its features, eligibility requirements, the application process, and more, so you can decide if that's the right path.
Let's begin!
Shopify small business loan is a financing option explicitly designed for Shopify merchants.
This funding solution gives eligible Shopify businesses access to between $200 and $1,000,000 in capital to help them grow and expand.
This loan is available in collaboration with Stripe Capital.
It is a lending platform that offers loans to businesses that use Stripe as their payment processor.
Shopify Capital offers two types of funding: Shopify Capital business loans and Shopify Capital merchant cash advances.
The two products differ significantly in terms of repayments but are similar in terms of financing amounts and cost.
Shopify Capital loans are one-time payments with a borrowing fee.
You repay the debt and fee in 12 monthly installments.
The funds are deposited into your business bank account.
Then, Shopify deducts a small percentage of your daily sales (the repayment rate) until you repay the loan and fee entirely.
There are payment "milestones" that you must meet along the road to guarantee that you pay back the total amount owed within 12 months.
You must repay at least one-sixth of the total sum owed every 60 days.
Assume Shopify gives you a $10,000 loan with a $1,000 borrowing fee and a 10% repayment rate.
So, the entire amount owed is $11,000 (the loan amount plus the fee).
Every day you make a sale on Shopify, Shopify will deduct 10% of your total sales until the entire $11,000 is repaid.
To guarantee that you repay the entire $11,000 within 12 months, you must pay at least $1,833 (one-sixth of the total) every 60 days.
If you don't meet your payment goals at the end of 60 days, the difference is immediately taken out of your bank account.
Shopify Capital merchant cash advances are one-time payments of $200 to $1 million that you get in exchange for giving Shopify a percentage of your future sales.
You will be required to repay the advance plus a borrowing fee.
Shopify takes a small, fixed amount from your daily sales until you pay off the advance and fee.
Unlike a business loan, there are no payment milestones or set repayment terms.
Instead, Shopify will continue to take a fixed percentage of your daily sales until you repay the advance and fee in full.
It makes the cash advance more flexible than the business loan, which you must pay back in full within 12 months.
As an illustration, suppose Shopify gives you a $10,000 merchant cash advance with a $1,300 borrowing fee and a 10% repayment rate.
The total sum you must repay Shopify is $11,300 (the advance plus the fee).
Then, Shopify will deduct 10% of your sales daily until the entire $11,300 is repaid.
Nothing will be removed on days when you have no Shopify purchases.
In addition, it gives you peace of mind because you know you'll only repay the advance as your business allows.
The Shopify Small Business Loan has many features that help Shopify merchants get the money they need quickly and easily.
Here are the main ones:
To be eligible for a Shopify small business loan, your business must meet the following requirements:
Shopify financing is only available by invitation.
It implies that Shopify will notify you once your account becomes eligible for funding with 3 options available.
Accepting a deal takes 30 days.
The offers are then withdrawn, and you must wait until the business sends you another invitation.
If your application is approved, you'll receive the funds in your account within 2–3 business days.
Repayment terms differ depending on the type of loan.
For example, if you have a merchant cash advance, you can pay the remaining amount in a single lump sum once you've remitted more than 25% of your total.
The payment is deducted from the company bank account associated with your Shopify store.
On the other side, with a business loan, you can pay at least $20 per month or settle the remaining amount at once.
Shopify's small business loan comes with a one-time fixed fee determined based on the loan amount and repayment term.
The fee is automatically deducted from the loan amount, so the actual amount you receive will be the loan amount minus the fee.
The fee ranges from 4.5% to 20% of the loan amount, depending on the loan term and amount.
How do I know the exact amount of fees and interest?
According to the examples on their website, they charge a factor rate of 1.1 or 1.13. Therefore, the average repayment percentage is 10%.
Your Shopify sales history and risk rating will determine your factor rate and the rate at which you pay back the loan.
💡 To get a clearer picture, use Shopify's Business Loan Calculator to determine how much you should borrow and roughly how much it'll cost.
You can use a loan to cover numerous costs, such as:
Shopify's small business loan offers several benefits to eligible Shopify merchants:
✅Easy application process that can be completed entirely online.
✅Fast funding with funds typically deposited into your account within 2-3 business days of approval.
✅No early repayment fees. You can pay back the loan early without additional costs.
✅Flexible repayment terms, with repayment periods ranging from 3 to 18 months.
✅Transparent fees.
There are some downsides to the Shopify Small Business Loan that you should think about before applying:
❌Limited loan amount: The maximum loan amount is $1,000,000, which may not be enough for larger businesses with significant capital needs.
❌Only available to Shopify merchants that use Shopify as their ecommerce platform.
❌Repayment terms: While the repayment terms are flexible, the interest-free nature of the loan means that the fee can be relatively high compared to other financing options.
❌Eligibility requirements are strict, which may limit the number of businesses qualifying for this financing option.
A Shopify small business loan can be an excellent financing option for eligible Shopify merchants looking to access capital quickly and efficiently.
But you should consider the limited loan amount, strict eligibility requirements, and high fees compared to other ways to get money before applying.
And most importantly, there is a location restriction.
Although US-based domains make ⅔ of all Shopify shops, merchants from the United Kingdom come in a close second place.
That's why you can consider alternative financing options, such as asset-based lending.
With Myos, ecommerce businesses can use their stock while accessing much-needed working capital.
It only takes a few minutes to apply with Myos, and once approved, you are free to use the secured funds however you see fit.
Moreover, Myos doesn't ask for a personal guarantee from its borrowers like many other online lenders do.
Because it requires so little paperwork, more online stores can get approved.
There is no need for elaborate business plans, credit score checks, or government-issued IDs.
And most importantly, there is no monthly schedule for your loan repayment.
You pay back to release a portion of your collateralized inventory whenever you need it and can choose how much you want to pay.
So, if your ecommerce business needs money fast and without much hassle, sign up with Myos today!
To get a business loan from Shopify Capital, you'll need to follow these steps.
First, you will receive an email from Shopify informing you that you have been approved for a company loan. Within two to five working days, you will be notified of approval.
In summary, there are a few important requirements to meet:
There are quite a few financing options available for Shopify owners, including Clearco, Viably, and others.
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