Access to capital and funding is essential for eCommerce businesses to succeed. Shopify Capital is a business funding program that provides financing to pre-qualified sellers to help them cover inventory costs, marketing expenses, hiring needs, and other growth initiatives.
Borrowers receive a lump sum and agree to a fixed borrowing fee offered by Shopify Capital. With a Shopify term loan, you can get up to $2,000,000, depending on your business’s eligibility, and manage repayments directly through an online dashboard.
While Shopify Capital loans offer you the flexibility to run your business and get financing from one place, you should fully understand the Shopify Capital eligibility review process before considering this option.
Breaking Down Shopify’s Eligibility Criteria
For merchants seeking inventory funding, the Shopify Capital eligibility review considers these factors:
- You must have an active online store hosted on the Shopify platform for at least 90 days.
- You need a consistent track record of revenue demonstrating your business’s stability and growth potential.
- Shopify Capital favors stores with at least a few months of sales history. Higher sales volumes further increase your chances of approval.
- Shopify Capital looks out for red flags in your finances, such as excessive chargebacks, legal issues, or sudden drops in sales.
- You must be able to repay the funding.
- You need a proven track record that positions your business as stable and unlikely to fail. (Newer stores may struggle to meet this requirement.)
- Offering a variety of products shows adaptability and enhances your eligibility.
Unfortunately, Shopify doesn’t share specific eligibility guidelines for what they consider stable businesses, so if your business is ineligible for funding, you may not know how to improve your chances.
Sellers who do pass the Shopify Capital review have the following main options for funding:
Short-Term Business Loans
Shopify provides a lump sum payment that must be repaid in full plus a flat borrowing cost. Payments are broken up into installments, and the typical repayment period is 12 months.
Merchant Cash Advances (MCA)
Shopify essentially purchases a share of future sales. As the borrower, you receive a lump sum from Shopify Capital that you’ll repay via deductions from your daily revenue until the loan plus costs are repaid. On days without sales, MCA loans often will not be deducted from your account.
Shopify Capital’s funding options vary according to your business location. Shopify term loans are only available to businesses in Australia and the United States, while merchant cash advances are available to businesses based in the US, Canada, and the UK.
Understanding Shopify Capital’s Review Process
The Shopify loan underwriting process consists of the following two stages:
Pre-Qualification
During pre-qualification, Shopify determines if your business is eligible to apply for financing. This is based on your sales history, engagement with the Shopify platform, and other criteria as outlined above. If you are eligible for funding, you will either receive a message on the homepage of your Shopify admin or be contacted by a Shopify sales representative. If you aren’t contacted by Shopify, that means your store doesn’t meet the requirements.
As part of the loan application process, you’ll need to submit financial documents with your application. You may be wondering, “Does Shopify Capital report to credit bureaus?” No, Shopify Capital does not report to credit bureaus or require a personal credit check.
Application Review
During the Shopify Capital eligibility review process, Shopify’s lending team will assess your application and financial information and confirm whether you are approved for term loans. Your application is reviewed within 1-3 business days, but it can take longer in certain cases. If your request is approved, your loan amount is transferred to your business bank account, typically within a few business days.
According to Shopify, its underwriting model analyzes many data points to calculate eligibility and what loans it will offer you. As a pre-qualified seller, you’ll typically receive three funding offers and can choose to move forward with the one that best fits your needs. However, it’s important to know these offers are non-negotiable.
When it comes to your Shopify Capital interest rate, Shopify’s process doesn’t align with traditional market rates. Rather, Shopify uses a factor rate, which is a fixed fee. Under your Shopify Capital loan or merchant cash advance purchase agreement, you’ll agree on a total payment amount: your loan amount plus the fixed borrowing fee. Loan repayments are automatically pulled from your daily sales, so you’ll repay the loan more quickly if your sales increase. If, however, you have days with no sales, you won’t make a payment on those days.
You can view and manage your daily sales revenue, balance, and payment history from your Shopify account.
Is Shopify Financing the Best Choice for Your Business?
Let’s take a look at the pros and cons of Shopify Capital loans to help you determine whether this financing option works for your business.
Pros
- No personal credit check required
- Funding is delivered quickly
- Substantial loan amounts
- Use funding on anything business-related
Cons
- Application process by invitation only
- Lack of transparency about eligibility criteria
- Loan amounts are non-negotiable
- High interest rates
Shopify Capital is helpful for your business if you have been in operation for some time and need quick funding to expand. However, Shopify Capital loans and cash advances are only available by invitation. For newer businesses, this exclusivity is a substantial barrier.
Can’t Get Shopify Capital? Consider This Alternative
If your business doesn’t meet Shopify Capital eligibility requirements, you’re not out of options—Kickfurther is here to help.
Kickfurther is a trusted alternative funding platform for business owners seeking inventory financing. Unlike traditional lenders, Kickfurther’s funding is not a loan, so costs are structured to support your business needs.
To provide funding, Kickfurther connects your business with a community of eager backers who fund your inventory on consignment. Traditional lenders don’t serve the unique needs of merchants; Kickfurther solves this problem by funding up to 100% of your inventory costs at flexible payment terms that you control.
Other funding providers may debit your account without concern for your sales cycle, but with Kickfurther, you control your repayment schedule. Kickfurther’s funding won’t affect your access to other capital or lower your store’s valuation.
You’ll get quick access to funds for your entire order(s) each time you need more inventory, so you can put your capital to work growing your business without adding debt or giving up equity.
Skyrocket Your Shopify Sales with Kickfurther
Kickfurther brings considerable expertise to the inventory funding process, bridging the gap between production costs and sales revenue. It’s the perfect alternative to Shopify Capital as it offers businesses flexible and affordable funding with fewer hurdles.
By funding your largest expense—your inventory—with Kickfurther, you’ll free up capital for other things, such as product development, advertising, and expansion.
Let Kickfurther be your trusted funding partner and get funding for up to 100% of your inventory at competitive rates. Contact a Kickfurther expert today to take your Shopify business to the next level.
