How Does Shopify Capital Work?: 3 Things You Need to Know

Shopify Capital is a powerful tool designed to provide quick, accessible funding to small businesses. But how does Shopify Capital work, and is it the right choice for your business? In this article, we’ll explore everything you need to know about this financing option, including its structure, limitations, and how to secure the best funding for your business growth.

1. What is Shopify Capital?

Shopify Capital is a financial service provided by Shopify that offers two main types of funding: merchant cash advances and loans. Its goal is simple — help Shopify merchants grow their businesses by offering fast access to capital based on their historical sales data.

Definition: A merchant cash advance is a type of financing where Shopify provides you with a lump sum upfront in exchange for a percentage of your future sales. Alternatively, Shopify Capital loans offer a more traditional loan structure with set repayment schedules and amounts.

Purpose: Shopify Capital’s mission is to empower small businesses, providing financial support to help with inventory purchases, marketing campaigns, or any business expansion plans. Since it leverages your store’s performance data, the funding amount and repayment terms are personalized based on how well your business is doing.

Eligibility: Not every Shopify store can access Shopify Capital. Shopify assesses your store’s eligibility by evaluating factors like your store’s sales performance, account health, and historical data. If your store consistently generates strong sales, maintains a healthy track record with Shopify, and shows promising growth potential, you may be considered for an offer. Shopify extends its capital offers to merchants it believes will be able to repay the advance or loan comfortably.

But understanding how to get Shopify Capital is not just about sales figures. Shopify considers other aspects such as your store’s payment history, Shopify plan type, and overall risk. Eligible businesses receive automatic notifications within their Shopify admin panel when they qualify for funding. No lengthy application process is required, making it a convenient financing option.

2. Limitations of Shopify Capital: What You Need to Know

While Shopify Capital may seem like an ideal solution, it comes with some important restrictions that every business owner should be aware of.

Funding Amounts Are Limited: Shopify Capital is directly tied to your store’s performance, which means that the amount you’re eligible to receive can vary greatly. This might be limiting for businesses with more substantial capital needs. The funding amounts typically range from $200 to $2 million, but larger, more established businesses may find this inadequate for their expansion plans.

Restricted Use of Funds: Shopify Capital doesn’t dictate exactly how you use the funds, but the capital is generally meant to be reinvested into your Shopify business. Whether it’s for inventory, marketing, or operational costs, Shopify expects the money to go back into your store. Some merchants may feel constrained by this informal limitation, especially if they’re exploring other business ventures outside of their Shopify store.

Repayment Terms Can Affect Cash Flow: For cash advances, Shopify automatically deducts a percentage of your daily sales until the full amount is repaid. While this may be flexible for businesses with fluctuating sales, it can also strain your cash flow during slower periods. Loan repayments are typically fixed, which could become a burden if your business experiences unexpected downturns.

Limited Recourse for Non-Eligible Merchants: Not every merchant will qualify for Shopify Capital, and those who do not meet Shopify’s internal metrics have limited recourse for appealing the decision. Additionally, Shopify Capital is only available to Shopify merchants, which means if you’re operating on another platform, this isn’t a funding option for you.

3. Access the Best Rates & Term of Funding for Your Shopify Business

While Shopify Capital is integrated directly into the Shopify platform and offers the convenience of quick access to funds, it may not always offer the best rates and terms for all merchants. Some businesses find that Shopify Capital’s financing options don’t meet their specific needs, whether it’s because of the limited amounts, repayment schedules, or overall cost.

For businesses looking for more flexible funding solutions, Yardline offers a range of options that can be tailored to meet diverse business needs. Yardline is a comprehensive funding partner that provides capital solutions for inventory expansion, product launches, marketing, and much more — all designed with the unique challenges of online businesses in mind.

Whether you’re running a small Shopify store or managing a large online enterprise, Yardline can provide funding ranging from $5,000 to $20 million. The application process is simple and fast, taking just a few minutes to complete. Approval decisions are often made within 24 hours, ensuring you get the capital you need quickly, which is crucial for seizing opportunities or covering urgent expenses.

With Yardline, Shopify merchants can access a variety of funding options including:

• Small Business Loans
• Revolving Lines of Credit
• Revenue-Based Financing
• Personal and Business Credit Cards
• PO and Invoice Factoring
• Inventory Financing
• SBA Loans
  
  

This level of flexibility and customization makes Yardline a valuable alternative to Shopify Capital. Whether you're looking for more capital, better terms, or different repayment options, Yardline offers the resources you need to succeed.

For business owners wondering how to get Shopify Capital or seeking alternatives to meet their financial goals, Yardline offers a tailored approach with competitive rates and diverse funding solutions. Yardline has already helped many Shopify sellers get the funding they need to grow their businesses, whether it's through running more ads, ordering additional inventory, or launching new products.

If you’re ready to grow your business and want the best rates and terms, apply for funding through Yardline today and get approved in as fast as 24 hours.