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Business loans for Shopify sites
Merchants may be able to get funding without a credit check — at the cost of daily payments.
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.
What types of loans are available to Shopify users?
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.
1. Shopify Capital loan
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:
- Loans up to $1 million
- Skip traditional lengthy business loan application process
- No credit check
- Funds within days of accepting an offer
- Only available in 14 states
- Daily payments are debited straight from your sales
- Nontransparent eligibility criteria
2. Shopify Capital merchant cash advance
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:
- Advances up to $1 million
- No credit check
- No repayment deadline
- Funding within days of accepting an offer
- Availability limited to 14 states
- Daily repayments are taken directly from your sales
- Unclear eligibility criteria
Which states are eligible for a Shopify Capital loan?
Stores located in the following states can apply for a Shopify Capital loan:
- Arizona
- Idaho
- Illinois
- Indiana
- Iowa
- Kansas
- Louisiana
- Maine
- North Carolina
- South Carolina
- Utah
- Washington
- Wisconsin
- Wyoming
All other states are eligible for the Shopify merchant cash advance.
See business loan options
Compare several more business loans to find the right fit.
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What other financing options do users have?
If you don't want to go through Shopify for funding, you have several other financing options:
- Business loan through a lender. Go the traditional route and get business capital from a loan provider. Typically amounts range from $5,000 to $5 million.
- Business line of credit. Draw from a revolving line of credit that only charges interest on what you borrow.
- Accounts receivable financing. Accounts receivable financing is a financial arrangement where a third party supplies funding in exchange for a portion of your accounts receivable.
- Crowdfunding. Shopify users can also turn to platforms like Kickstarter or Indiegogo, where potential customers pledge funds for preorders on goods or services.
How do I qualify for a business loan for Shopify?
Shopify's business loan eligibility criteria is pretty vague. Here's what it lists on its website:
- Your store is located in an eligible state for loans
- Your store is located in an eligible state or Canada for merchant cash advances
- Low-risk business profile
- Your shop uses Shopify Payments or another third-party payment provider
- Your shop meets its minimum sales requirement
What do I need to apply?
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.
What costs do I need to consider when selling on Shopify?
On top of inventory and labor, Shopify sellers may also need to account for the following expenses:
- Monthly cost. Shopify charges a monthly fee for using its platform.
- Credit card rates. While all platforms charge this fee, it's a cost that eats into your bottom line.
- Transaction fee. You'll get hit with a fee on every transaction if you use a third-party processor instead of Shopify Payments.
- Additional plugins. Although some plugins are free, many are monthly subscriptions, such as customer service help desks and email marketing services.
- Custom domain name and email. You'll need to purchase your own domain name and email accounts for your e-commerce business.
Bottom line
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.
Learn more about how providers can help boost your online business with our comprehensive e-commerce guide.
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