Shopify Capital Loan Calculator: A Guide to Smart Financial Planning
By Sam Nguyen
The Shopify Loan Calculator is an essential resource that enables merchants to forecast their loan repayments and make well-informed financial choices. Whether considering a new investment or seeking insights into your financial stance, this calculator is an invaluable tool all store owners need to have.
Key Takeaways
- Shopify Capital’s Versatility: Designed exclusively for Shopify merchants, it offers a predetermined lump sum with a fixed borrowing cost, simplifying the borrowing process for online businesses.
- Flexible Repayment: Using the innovative “daily payment percentage” model, repayments are calculated based on daily sales, making it ideal for businesses with fluctuating revenue, ensuring payments align with income.
- Simplified Application: Shopify has optimized the loan application process for clarity and efficiency. Merchants can even switch payment providers as needed.
- Potential for Growth: Beyond financial assistance, Shopify Capital acts as a strategic tool for merchants. With instant access to funds, businesses can fuel growth initiatives, invest in inventory, and manage seasonal cash flow challenges.
Shopify Capital Loan: A Breakdown Detail
Before delving deep, it’s crucial to understand the two primary loan products offered by Shopify Capital.
Shopify Capital Loan for merchants in Australia & US
In Australia, Shopify Capital extends loans to merchants by offering a specified lump sum, termed the loan amount. This comes with a fixed borrowing fee, known as the “cost of funds.” Together, they form the “total payment amount” as outlined in the merchant loan agreement. Upon approval, this amount is swiftly transferred to the merchant’s business account.
Repayment is simplified, deducting a set percentage from daily sales, dubbed the “daily payment percentage.” Both figures are tailored based on the merchant’s risk profile.
For US merchants, the concept is similar, but loans are provided by WebBank. Merchants receive a lump sum against a fixed borrowing fee, and repayments are made by deducting a percentage of daily sales, referred to as the “daily payment percentage,” catering to the unique needs of US enterprises.
How to request a loan
The process for loan application is parallel for both Australian and US merchants:
- Step 1: Accessing Options: From your Shopify admin, navigate to Finances > Capital.
- Step 2: Assessing Terms: Thoroughly review the terms of the available funding options. When ready, click “Apply now” beneath your preferred choice.
- Step 3: Verification: Authenticate your identity and provide relevant business details for Shopify Capital’s consideration.
- Step 4: Loan Agreement: Click “Merchant Loan Agreement” within the dialog. Ensure you meticulously review the agreement’s terms before proceeding.
- Step 5: Payment Provider (Optional for US): For those wishing to switch to Shopify Payments, select “Change my payments provider to Shopify Payments.” Note: For US merchants, making this switch could extend the approval time beyond five business days.
- Step 6: Final Submission: Click “Submit application.” Returning merchants should be aware that they might need to re-verify their details with Shopify Capital, irrespective of past funding experiences.
Shopify Capital merchant cash advance for merchants in Canada, US & UK
If you’re a merchant in three countries looking for financial support to grow your e-commerce business, Shopify Capital offers a unique solution: the Merchant Cash Advance program. In this guide, we’ll explore how this program works and the steps you take to request a merchant cash advance in each country.
Request a merchant cash advance
In Canada, Shopify Capital offers a funding mechanism called the merchant cash advance. This entails Shopify purchasing a segment of your anticipated sales for an upfront cash payment. The sum of the advanced amount and a set fee is termed as the “total to remit.”
For instance, Shopify Capital provides an advance of 5,000 CAD, expecting repayment via future sales totaling 5,650 CAD. With a 10% remittance rate, 10% of your store’s daily sales will be sent to Shopify Capital until the 5,650 CAD is fully repaid.
Importantly, there’s no strict repayment deadline. Instead, daily remittances derived from sales are automatically deducted from the merchant’s bank account.
Similarly, Shopify Capital has extended merchant cash advances in the United States. Just like the Canadian model, this involves Shopify providing a lump sum upfront in return for a portion of your future sales.
For those in the UK, Shopify Capital, in collaboration with YouLend, offers the merchant cash advance system.
For instance, if Shopify Capital and YouLend decide to purchase 5,000 GBP of your future sales, you receive this amount upfront. In return, a designated percentage of your daily sales is remitted until a predetermined total amount is settled.
Read more: Shopify Fee Calculator: How Much Does A Shopify Store Cost?
Application Process across Regions
If you find your business eligible for the merchant cash advance, here’s a brief guide on how to proceed:
- Step 1: Navigate to Settings > Capital, and click “Offers” on your Shopify admin panel.
- Step 2: Evaluate the terms of available funding options. Click “Apply now” for your desired option.
- Step 3: Authenticate your identity and provide necessary business details.
- Step 4: In the Review and Accept terms, click “Review and accept the relevant agreement” (varies by region).
- Step 5: Choose “Change my payment provider to Shopify Payments” to change your payment provider.
- Step 6: Apply by clicking “Accept terms.”
Shopify Capital Loan features
Whether you’re scaling your business, introducing new products, or navigating a surge in demand, Shopify Capital’s loan offerings cater to diverse needs. Here are the critical attributes of Shopify Capital loans:
Loan Amount
Shopify Capital offers robust financial support, with loans reaching up to $5 million. Thus, from budding startups to well-established enterprises, businesses can obtain the essential capital to fuel their expansion and operational goals.
Estimated APR Range
The APR (Annual Percentage Rate) represents the cost of borrowing over a year. While the rates for Shopify’s business loans and merchant cash advances vary based on a business’s revenue, specific interest rates are not disclosed on Shopify’s website.
Fees
Shopify Capital charges a fixed fee for business loans and merchant cash advances.
Terms
While Shopify doesn’t specify exact term lengths for their business loans, their merchant cash advance model is straightforward: repay until the entire financing cost is settled.
Repayment Schedule
For both business loans and merchant cash advances, a daily payment system is chosen. This payment corresponds to a predetermined percentage of the total sales revenue earned on that particular day.
The advantage of this model is its flexibility: on days with higher sales, your repayment is higher, and on days with no sales, you won’t make any payments.
Funding Speed
Normally, Shopify Capital reviews applications for business loans and merchant cash advances within one to three days, but in special cases, it takes longer to process. Upon approval, the funds are automatically transferred to the business bank account.
When are Shopify loans used?
Shopify loans are a versatile solution for online merchants. They’re particularly beneficial in various scenarios:
- Inventory Purchase: Buy inventory to avoid running out of stock.
- Space Expenses: Cover costs for warehouse or production spaces.
- Marketing Funding: Use loans for marketing campaigns to boost visibility and sales.
- Cash Flow Challenges: Overcome cash flow dips, especially from non-Shopify customers.
- Supply and Equipment Procurement: Acquire necessary supplies and equipment.
- Business Continuity: Stay operational during slow seasons.
These loans benefit startups, growing businesses, seasonal enterprises, and those with limited credit history. They stand out for their flexible repayment model, based on a percentage of daily sales. However, merchants should carefully manage loan repayments to operate efficiently.
Shopify Loan Capital is best for
Shopify Capital, Shopify’s financing branch, has become a trusted solution for many merchants on the platform. But who exactly stands to benefit the most from this offering? Let’s break it down based on different business needs and scenarios:
- Shopify Sellers: Tailored Financing Solutions
First and foremost, Shopify Capital caters exclusively to Shopify sellers. This exclusivity ensures that the loan solutions are tailored to the specific challenges and nuances of running an online store on Shopify.
Plus, it’s a particularly excellent option for merchants on the platform who are navigating short-term cash flow challenges.
- The Short-Term Borrowers: Affordability Meets Speed
For businesses needing swift short-term financing, Shopify Capital stands out for its affordability and efficiency. Often more cost-effective than numerous alternative lenders, Shopify Capital offers a streamlined solution, bypassing the prolonged and cumbersome traditional loan application processes.
- Consistency is Key: Rewarding Reliable Sales
Consistent sales performers among Shopify sellers stand in good stead for financing through Shopify Capital. Such steady performance often underscores business stability and growth prospects. Consequently, these eligible sellers can swiftly tap into small-business loans and merchant cash advances, bolstering their expansion endeavors.
- The Need for Speed: Quick Funding Solutions
Shopify typically evaluates applications for business loans and merchant cash advances within one to three business days, though some instances might require additional time. Upon approval, funds are directly credited to your associated business bank account.
How to use this funding to elevate your Shopify store
In the dynamic online business world, standing still isn’t an option. Growth is pivotal. However, scaling an operation often demands resources that aren’t immediately available. While expansion is a universally desired outcome, financial constraints can hamper progress.
If you’re looking to harness funding to elevate your Shopify store, here are some actionable ways to make the most out of your investment:
Bulk Inventory Purchases: Unlocking Economies of Scale
One of the quickest ways to boost your profit margins is by purchasing bulk inventory. By doing so, you can negotiate more favorable wholesale prices, allowing you to offer competitive retail prices while maintaining healthy margins.
Swift Supplier Payments: Leveraging Invoice Discounts
Liquidity is paramount, often serving as a potent leverage in negotiations. By settling supplier invoices on time, you can secure favorable discounts. It’s crucial, however, to ensure that the discount obtained outweighs the interest on any borrowed capital. This strategy not only strengthens supplier ties but can also enhance your profitability.
Expanding Storage Capacities: Ensuring Timely Deliveries
Nothing dampens a customer’s experience more than delayed deliveries due to stockouts. Using your funding to increase warehouse space means you can carry more inventory, ensuring that products are always available for shipping. This operational efficiency can significantly enhance customer satisfaction and brand loyalty.
Promotional Campaigns: Building for the Future
Consider using some funding to offer short-term promotions. While this might eat into your immediate profits, think of it as an investment in future customer acquisition. By giving a little now, you stand to create a more extensive, loyal customer base, which will pay dividends in the mid-term.
Debt Consolidation: Prioritizing Financial Health
If you’ve previously taken on short-term loans with high-interest rates, consider using more affordable long-term borrowing to consolidate and pay off that expensive debt. This restructuring can significantly reduce monthly obligations and improve your store’s financial health.
Alternative Tools to Shopify Capital
While Shopify Capital provides customized financial solutions for Shopify store owners, it’s important to note that there are other options for securing funds. These alternative lending platforms may be suitable depending on your specific business needs, the amount of capital required, or your location.
OnDeck
OnDeck has gained recognition in the small business financing landscape. With a straightforward application process, businesses can access strategic working capital ranging from $5,000 to $250,000 within 72 hours of approval.
For example, OnDeck has invested over $15 billion in U.S. businesses and holds an impressive A+ rating with the Better Business Bureau. Here are some notable offerings:
- OnDeck Line of Credit: A flexible revolving credit line available 24/7, with credit limits ranging from $6,000 to $100,000 and repayment terms spanning 12 to 24 months. Ideal for businesses needing readily available funds.
- OnDeck Term Loan: Designed for businesses making significant investments, this loan offers a one-time lump sum from $5,000 to $250,000, with repayment over up to 24 months. Direct lending ensures a seamless process with OnDeck, eliminating third-party complications.
Key advantages include fast funding, soft credit checks that won’t harm your credit score, and attractive cash-back offers for new applicants.
Funding Circle
Positioned as a leading platform for business loans, Funding Circle provides straightforward financing solutions. Whether you’re looking to expand, manage cash flow, or hire, their offerings might be just what you need
With a promise of speed and affordability, Funding Circle helps businesses access funds quickly. Since 2010, they’ve assisted over 135,000 businesses, channeling a substantial £15.2 billion into various ventures. Their loan products range from standard business term loans to flexible business lines of credit.
Also, FlexiPay is an interest-free line of credit designed for effective cash flow management and convenient cost spreading over 3 months.
Fora Financial
Fora Financial is renowned for its fast, dependable business capital offerings. Businesses can secure between $5,000 and $1.5 million within 72 hours of approval. Their impressive track record:
- Small Business Loan: Fixed-term loans tailored for businesses needing quick working capital for various operations such as expansion or cash flow management. These loans come with benefits like prepayment discounts and repayment terms extending up to 15 months.
- Revenue Advance: A unique lending solution tailored for businesses with fluctuating cash flows. Payments are structured as a fixed percentage of daily or weekly gross receipts, making it adaptable to business performance.
American Express
AMEX offers more than just credit cards. Their financial services cater to diverse business needs:
- Card Options: Personal cards, business credit cards, corporate programs, and prepaid cards.
- Travel Services: Covering trip bookings, access to fine hotels and resorts, and an international airline program.
- Membership Rewards: A rewards program lets businesses earn points on eligible purchases.
- Business Loans: Exclusively for pre-approved Business Card members, AMEX offers business loans to help ventures expand and grow.
Shopify Loan Calculator: FAQs
However, always evaluate your business’s financial health and consult a financial advisor before securing any loan.
Final Thoughts
Navigating the complex business financing world can be exciting and challenging. With choices ranging from Shopify Capital for dedicated Shopify sellers to a variety of alternative financing options, there’s a solution tailored to almost every business need.
Read more: Shopify Plus Calculator: Breaking Down Shopify Enterprises Plan
