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As a Shopify user, you have plenty of financing options to grow your business. And if you go through Shopify for funding, you can skip the credit check. But it only offers one-year loan terms or a cash advance. It also isn't up front with its eligibility criteria or cost of borrowing.
Shopify offers two financing options, depending on what state your store is located in. You can borrow anything between $200 to $1 million, but your loan terms depend on your risk profile.
With a Shopify Capital loan, you borrow a lump sum at a fixed cost. This 12-month loan has a set repayment rate, which Shopify draws from your daily sales revenue until your entire loan is paid off.
Shopify Capital loans are split into six 60-day repayment periods, what Shopify calls milestones. If you don't reach your minimum payback amount from daily sales payments by the milestone date, Shopify will debit the remaining amount from your account.
Let's say you borrow $10,000 with a borrowing cost of $1,300 and a repayment rate of 10%. Shopify will deposit $10,000 to your business bank account and take 10% of your daily sales revenue until the total $11,300 is repaid.
Your loan has six 60-day milestones with a minimum payback amount of $1,883.33 — one-sixth of your total debt. If you only pay $1,500 through your daily payments, Shopify will debit the remaining $383.33 from your account.
Here's a breakdown of the advantages and drawbacks of a Shopify business loan:
Shopify's merchant cash advances let you get an advance on your future sales revenue. You then sell it back for a set amount that's more than what you were advanced, what Shopify calls the total to remit. Shopify debits a percentage of your daily sales until the total to remit is paid off.
Merchant cash advances don't have remittance deadlines. But once you've paid over 25% of your total to remit, you can choose to pay the entire remaining balance in a lump sum.
Let's say you get a cash advance for $10,000 and agree to sell Shopify $11,300 of your future revenue with a remittance rate of 10%. Shopify will fund your business bank account with $10,000 and receive 10% of your daily sales revenue until you remit the full $11,300 owed.
These are a few reasons you might — or might not — consider a Shopify merchant cash advance:
Stores located in the following states can apply for a Shopify Capital loan:
All other states are eligible for the Shopify merchant cash advance.
Compare several more business loans to find the right fit.
If you don't want to go through Shopify for funding, you have several other financing options:
Shopify's business loan eligibility criteria is pretty vague. Here's what it lists on its website:
You won't find a full application on Shopify's website unless your business prequalifies for financing. It lists one requirement to complete its application, which is your business bank account details. It also states you may need to submit additional documents — but doesn't specify what these might be.
On top of inventory and labor, Shopify sellers may also need to account for the following expenses:
Shopify merchants have access to a handful of financing options, including skipping the traditional business loan through a lender and opting to access funds through Shopify Capital. But whether you qualify for a Shopify Capital loan or merchant cash advance depends on where your business is located and your sales.
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