Shopify Capital Review 2020: Rates, Fees, and Terms

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What Is Shopify Capital?

Shopify Capital is a business financing program through which Shopify sellers can get fast access to business loans and merchant cash advances. The funding is available by invitation only for sellers who have an established history of Shopify sales. 

More than one million ecommerce businesses use Shopify, and the platform reaches over 300 million customers. The platform is growing more every year. There’s a huge diversity of small businesses on the platform, and Shopify Capital can help merchants grow their businesses to the next level. Read on to learn more about how Shopify Capital works, how much it costs, and the pros and cons.

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Shopify Capital Funding Options

Shopify Capital provides business funding to eligible Shopify merchants, either in the form of a business loan or merchant cash advance. Shopify regularly monitors your sales revenue and will alert you if you’re eligible for Shopify Capital. They can quickly approve your business for funding and can potentially offer you lower-cost financing than you’d be able to find elsewhere.

There are two Shopify Capital funding options—Shopify Capital business loans and Shopify Capital merchant cash advances. The two products have some notable differences around repayment, but are similar in terms of funding amounts and cost.

Shopify Capital Loans

Shopify Capital loans are lump sum loans between $200 and $1 million that come with a borrowing fee. You repay the loan and fee in increments over a 12-month period. Funds are deposited into your business bank account, and Shopify deducts a small fixed percentage of your daily sales—called the repayment rate—until the loan and fee are fully repaid. To ensure that you pay back the total amount owed within 12 months, there are payment “milestones” that you have to meet along the way. Every 60 days, you must pay back at least one-sixth of the total amount owed.  

For example, let’s say Shopify offers you a $10,000 loan with a borrowing fee of $1,000 and a repayment rate of 10%. The total owed is $11,000 (the loan amount plus the fee). Every day that you have Shopify sales, Shopify will deduct 10% of your sales until the full $11,000 is repaid. To ensure that you pay back the full $11,000 within 12 months, you’ll have to pay at least $1,833—one-sixth of that total—every 60 days. If, at the end of a 60-day period, you’re not able to meet your payment milestones, the shortfall is automatically debited from your bank account.

Shopify Capital Merchant Cash Advances

Shopify Capital merchant cash advances are lump sum amounts between $200 and $1 million that you receive in exchange for repaying a set amount of your future sales revenue to Shopify. You’ll have to repay the advance plus a borrowing fee. The advance gets deposited into your business bank account, and Shopify deducts a small fixed percentage of your daily sales until the advance and fee have been collected.

In contrast to the business loan, there are no payment milestones and no fixed repayment period. Instead, Shopify just keeps deducting a fixed percentage of your daily sales until the advance and fee are fully paid back. This makes the cash advance a bit more flexible than the business loan, which has to be fully repaid within 12 months.

To take an example, let’s say Shopify offers you a $10,000 merchant cash advance with a borrowing fee of $1,300 and a repayment rate of 10%. The total amount that you have to repay Shopify is $11,300 (the advance plus the fee). Every day that you have Shopify sales, Shopify will deduct 10% of your sales until the full $11,300 is repaid. On days that you have no Shopify sales, nothing will be deducted. This gives you some peace of mind knowing that you’ll repay the advance only as your business allows.

Who’s Eligible for Shopify Capital?

Shopify will let you know if you’re eligible for a Shopify Capital business loan or merchant cash advance. Eligibility is based on the following criteria:

  • Your store must be located in the U.S. or Canada (Shopify Capital loans are only available in select U.S. states, whereas Shopify Capital advances are located throughout the U.S. and Canada).
  • Your business is assessed to be low-risk. 
  • Your store has enabled Shopify Payments or uses another online payment processor.
  • Your store must process a certain amount of sales.

Keep in mind that you don’t apply for Shopify Capital. Rather, Shopify will alert you via email if you’re found to be eligible based on the parameters shown above. You’ll also be able to view your pre-qualified funding offers in your Shopify admin dashboard. These offers are usually valid for 30 days. At this point, keep in mind that the offers are just that; you’re not yet guaranteed to receive funding. If you choose a funding offer, Shopify generally takes two to five business days to give the final stamp of approval. If you’re approved, you could see the funds in your bank account as soon as the next business day.

Shopify doesn’t explain what exactly is meant by a “low-risk” business profile, but it likely is related to things like your industry and history of sales. For example, a business with a steadily growing pattern of sales is more likely to qualify for funding than a business with seasonal sales revenue. Shopify also doesn’t reveal the volume of sales you must process to qualify for funding, but they do make it clear that they regularly monitor seller accounts. This means that even if you don’t qualify for Shopify Capital now, you might in the future.

Shopify Capital Rates, Fees, and Terms

Shopify Capital does not charge a simple interest rate. Based on the examples provided on their website, they charge a factor rate of 1.1 or 1.13. Repayment rates average 10%. Your factor rate and repayment rate will depend on your Shopify sales history and risk profile. 

In order to understand the cost of Shopify Capital compared to other types of business loans, it helps to calculate the annual percentage rate (APR). The APR can be used to convert the cost of Shopify Capital into an annualized interest rate, taking the borrowing fee and repayment rate into account. You can calculate the APR on your Shopify Capital loan or advance by using Fundera’s short-term loan calculator or merchant cash advance calculator, depending on which product you’re considering. 

To take one example, the APR on a $10,000 Shopify Capital loan with a 1.1 factor rate is 19.61%. The APR on a $10,000 Shopify Capital advance with a 1.1 factor rate is 42.63%, assuming you make approximately $20,000 in monthly Shopify sales and are assessed a repayment rate of 10%. To provide some perspective, bank business loans have APRs around 7% or 8%. Although Shopify Capital is much more expensive than a bank loan, the debt is also paid back much more quickly. If you need a quick shot of capital for your business, Shopify Capital could be a good option.

Shopify Capital Pros and Cons

Shopify Capital is a quick and convenient way for Shopify merchants to access funding, but it’s important to weigh the pros and cons.

Shopify Capital Pros

  • Quick, easy application and funding process
  • Provides an alternative to traditional financing for Shopify merchants
  • Wide range of funding amounts are available ($200 to $1 million)
  • Less expensive than some other short-term loans and merchant cash advances
  • Repayment keeps pace with your level of daily sales (e.g. you pay more on a good day and less on a bad day)
  • Easily monitor repayment progress in your Shopify admin dashboard

Shopify Capital Cons

  • Shopify Capital is only available to Shopify sellers
  • Eligibility criteria, such as what constitutes a low-risk business, isn’t clear
  • Daily debits from your Shopify sales revenue can hamper cash flow

Best Alternatives to Shopify Capital

The biggest advantages of Shopify Capital are the speed and simplicity of the application process. If that’s what you’re after, here are additional funding platforms that are worth considering:

PayPal Working Capital

Many Shopify sellers offer PayPal as a payment option for their customers at checkout. If you do, you’re also a PayPal merchant and may be eligible for PayPal Working Capital. This funding program works in much the same way as Shopify Capital loans. You’ll get a lump sum of capital from PayPal and will be assessed a borrowing fee. You have to pay back the loan and fee with a fixed percentage of your daily PayPal sales. You also need to repay a minimum of 5% or 10% every 90 days to keep your PayPal loan in good standing. PayPal bases your eligibility on your sales history.


Another good alternative to Shopify Capital that offers a similar level of speed and convenience is Kabbage. Kabbage is open to any eligible small business, not just to Shopify merchants. But if you are a Shopify merchant, that can work to your advantage in the application process. That’s because Kabbage pulls information from all the platforms you sell on, including Shopify, Etsy, PayPal, Amazon, and more. If you qualify for a Kabbage loan, you can get up to $250,000 in funding and choose to pay it back in six or 12 months.

Funding Circle

Yet another alternative to consider is Funding Circle. Funding Circle’s online application is fast and simple, but the product is closer to what you’d find at a bank. Funding Circle offers medium-term loans of up to $500,000 and interest rates start out at single digits. To qualify, you need to have been in business for at least a couple of years and have good credit. You also need to submit recent tax returns and business bank statements to support your application. Shopify, in contrast, doesn’t check prospective borrowers’ credit scores and doesn’t require any documentation

The Bottom Line

Shopify Capital is a relatively new entrant to the small business funding space, but customers who have used it seem to be pretty happy with their experience. Shopify Capital can be expensive compared to more traditional financing options, but the speed and convenience of the product are enticing for Shopify merchants. If you’re looking to grow your Shopify store, Shopify Capital might be the ideal solution.

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Senior Contributing Writer at Fundera

Priyanka Prakash, JD

Priyanka Prakash is a senior contributing writer at Fundera.

Priyanka specializes in small business finance, credit, law, and insurance, helping businesses owners navigate complicated concepts and decisions. Since earning her law degree from the University of Washington, Priyanka has spent half a decade writing on small business financial and legal concerns. Prior to joining Fundera, Priyanka was managing editor at a small business resource site and in-house counsel at a Y Combinator tech startup.

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