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Shopify Capital merchant cash advance review

Your business may be able to take advantage of a merchant cash advance (MCA) of up to $2 million.

Small businesses can gain access to funds between $200 and $2,000,000 in exchange for a portion of their future revenues.

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If you’re a small business in Canada, you may be considering a merchant cash advance instead of a business loan. Here are the key features of a Shopify Capital merchant cash advance:

  • Think about the Shopify MCA if you’re looking for quick access to cash for your business, but you’re having trouble securing a business loan.
  • Pick something else if you don’t want daily withdrawals taken from a percentage of your sales. This is how businesses repay their MCA.
  • Keep in mind, your business needs to be set up with a Shopify account to request an MCA, view funding offers and keep track of your MCA payments.

There is no deadline for remitting the total to Shopify Capital. The daily remittance amount is determined by your store’s daily sales, because the remittance rate is a percentage of your store’s daily sales. The remittance amount is automatically debited from your business bank account.

Expert review

If you’re one of the many business owners using Shopify to manage your storefront and point-of-sale system, its merchant cash advance is a great option to inject capital into your company. Instead of a traditional business loan, which can come with an arduous application process and rigid terms, Shopify offers an alternative solution.It offers you merchant cash advances so you can avoid applying for loans and getting your credit checked. You also aren’t locked into set repayments each month. Your repayments for your cash advance fluctuate based on your sales, which is helpful if your business is having a slow month or you need to keep cash flow open for other operational uses.

First, do I qualify?

Shopify doesn’t allow its users to apply directly for funding. Instead, Shopify will email you with funding offers that it has pre-qualified your business for. You can compare offers and request to proceed with the offer you want. 

While its list of eligibility criteria isn’t shared online, your store should meet the following criteria:

  • Be located in Canada.
  • Sells in Canadian dollars.
  • Regularly processes high volumes of sales.
  • Have a low-risk profile.
  • Uses Shopify Payments.

Keep in mind, offers are valid for 30 days. While you may accept an offer, Shopify will reassess your business during its underwriting process before issuing your MCA.

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What makes the Shopify Capital merchant cash advance unique?

Shopify is all about making it easier for small businesses to grow, from its easy-to-use point-of-sale systems to setting up an online store to sell directly to customers and ushering in loan products to take companies to the next level.

The MCA is another great feature to add to Shopify’s roster. It focuses on your future sales projections instead of your credit history and the collateral you’re willing to put on the line. The approvals process is faster than a conventional business loan, and you can receive funding within 2 business days.

The repayment plan is malleable as well. Instead of set monthly payments, an agreed-upon percentage of daily sales is collected to pay back your advance. You’re not locked into these payments indefinitely, either. Once you’ve repaid 25%, you’re allowed to repay the remainder of your balance in one lump sum. Ultimately, this flexibility offers small businesses an option to inject cash into their company without committing to a concrete amount to repay each month regardless of how their business is faring. 

How it works

A merchant cash advance is similar to a traditional business loan in which you receive a lump sum of money. The difference between the two is how you’ll repay your MCA. With an MCA, you’ll pay Shopify a percentage of your daily sales until the total amount, plus a fixed fee, is repaid.

For example, Shopify advances you $5,000. The terms are for you to repay $5,650 from your future sales, with Shopify withdrawing 10% daily until that amount is repaid. There is no deadline, and once you repay 25% of the outstanding balance, you are free to pay off the rest in one lump sum.

Shopify offers funding amounts between $200 and $2,000,000. The amount you can pre-qualify for and your remittance rate will depend on your business’s individual risk profile.

What are the benefits of a Shopify merchant cash advance?

  • Shopify pre-qualifies your business and provides MCA offers you can choose from. You don’t have to apply for a merchant cash advance like you would with traditional loans or other lenders issuing MCAs. Instead, Shopify will email you if you’re eligible for funding. The decision is yours to proceed with an MCA offer that fits the bill.
  • No credit check. Because Shopify reviews your business before it offers funding, it emphasizes your business’s revenue, profit and daily sales over your credit history.
  • No collateral required. While some traditional business loans require collateral to get started, you won’t have to put any assets on the line.
  • Wide range of cash advance amounts. You can borrow anywhere from $200 up to $2 million.
  • Remittance is a percentage of your daily sales. While traditional business loans require a set monthly payment regardless of how your business fares, Shopify takes a percentage of your daily sales. This may allow you to free up your cash flow.
  • Early repayment option. You have the option to repay the entirety of your loan after you’ve repaid at least 25%.
  • Does not register on your credit file. The cash advance doesn’t affect either your personal or commercial credit histories.

What to watch out for

  • MCAs don’t help you build credit. Because a merchant cash advance isn’t a loan, you won’t build a better credit history for your business. If this is a priority, you may want to look into other options.
  • Daily remittance deducted from your sales. You’ll repay your MCA via daily withdrawals from your business account. This will be a set percentage of your daily sales. Your remittance rate is decided based on your business’s individual risk profile.
  • Fees. While Shopify doesn’t list its range of fees, you will pay a fee for your MCA. On its website, it uses an example of advancing $5,000. Your amount to repay would total $5,650, which is a fee of 13%.

How do I apply?

If you’re interested in a Shopify MCA, your business needs to be set up with a Shopify account. From there, you can view Shopify funding offers sent your way. Here’s a step-by-step look at how to navigate the Shopify MCA application process:

  1. Head to your Shopify account, go to Settings and then Capital.
  2. Find the eligibility message you received from Shopify Capital and then click “View Funding Offers.”
  3. On the Capital page, there will be funding options available to you. Compare the terms of the funding options and then click “Request” on the one you’d like to proceed with. The terms of each option will include the amount received, the total amount to repay and the remittance rate that will be deducted from your daily sales.
  4. After you click on “Request,” you will need to review and accept the terms of your MCA. Carefully read through the terms and conditions, then click “Shopify Capital Agreement.”
  5. Review the terms of the Shopify Capital Agreement and the pre-authorized debit agreement. If you agree with the terms, click “Accept Terms.”
  6. After this step, your request will be reviewed by Shopify and you’ll hear whether you’ve been approved within 2 to 5 business days.
  7. If you’re approved, your merchant cash advance will be transferred directly to your business bank account.

    Funding offers are typically good for up to 30 days, but Shopify may change or cancel your funding offer at any time based on your business’s sales and metrics. If you choose not to take a funding offer and it expires, you won’t be able to request a loan or merchant cash advance — instead, Shopify will notify you if your business becomes eligible for funding again.

What documents do I need to apply?

Shopify doesn’t list the information you need to have on hand when you apply. But because Shopify reviews your business before it offers funding, it may only need to confirm your business’s revenue, profit and daily sales. You’ll also need to verify your banking information so your advance can be transferred over to you, and Shopify can take daily withdrawals from your account.

Check with Shopify to confirm the information your business will need to submit.

I got the Shopify Cash Advance. Now what?

Shopify will transfer the lump sum of your advance into your business bank account. After that, you can expect a daily withdrawal from your account, based on a percentage of your daily gross sales. How much you need to repay and your remittance rate will be outlined in your contract with Shopify. The withdrawals will begin 2 days after you’ve received your MCA.

When you’ve repaid 25% of your total debt, you have the option to repay the entire balance in a single lump sum. The payment is debited from the same business bank account that’s tied to your Shopify account so make sure you keep adequate amounts of cash in there.

You can keep track of your remaining balance to pay back on your Shopify user account. From the Capital page, you can view your remaining balance, the amount you’ve paid, the percentage of the total that’s paid and the daily withdrawal history.

You can also view each day’s sales revenues and how much is paid to Shopify on the Capital page.

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