It doesn’t take a veteran entrepreneur or business owner to know that you either need a big bank account, plenty of funding, or both to start a business. And whether you are starting a brick and mortar or online business, you’re going to need some extra revenue to get started.
Why? Because sadly, nearly 30% of small businesses fail because they run out of cash. But, it doesn’t have to be that way.
Business owners have more options available for raising capital and financing their businesses than they think. And one of the financing solutions available is Shopify loans through Shopify’s lending program, Shopify capital.
Let’s discuss what Shopify capital is and the pros and cons of using Shopify loans. We’ll also explore additional funding solutions for ecommerce businesses.
As one of the world’s leading ecommerce platforms, Shopify helps businesses launch their online store and helps fund their growth with Shopify capital loans through their program, Shopify Capital.
Launched in April 2016, Shopify Capital is Shopify’s business financing and lending program for Shopify sellers in the U.S., Canada, and the United Kingdom (U.K.) to get access to business loans and merchant cash advances for marketing, payroll, and inventory expenses.
Shopify capital loans, which are only available to U.S. Shopify sellers, do not work like traditional loans where you pay back monthly installments with an additional interest rate included.
Instead, they purchase a portion of your future receivables meaning they automatically reroute some of the revenue you earn from future sales to repaying your Shopify capital loans.
Furthermore, rather than a long, drawn-out approval process, Shopify analyzes businesses based on the information it already has about your store, including the risk you present. And while not all businesses will qualify, it’s a quick and affordable shot at capital for you and your ecommerce business.
Shopify Capital funding totals somewhere between $200 and $1,000,000, though it’s generally on the lower end of this range.
Business owners should also keep in mind that Shopify has payment milestones to ensure you pay back the money you owe within twelve months. And, every sixty days, at least one-sixth of the total loan amount must be paid.
If your daily sales payments don’t equal the minimum required amount when you hit one of the milestones, Shopify will take the difference you owe from that period from your business bank account. You also have the option to pay more towards your Shopify loan or pay it off early to avoid penalties.
Shopify Loans offers a fast and relatively easy way to access extra cash, but business owners should do their research and weigh the pros and cons before they apply for this type of loan.
Only for Shopify users: If you are not a Shopify user and in the U.S., you will not qualify for a Shopify loan.
Short term on capital loans: Capital loans have a 12-month term and one-sixth of the loan must be repaid every sixty days – often resulting in costly repayments.
Limited eligibility: If your business has not been pre-qualified, you must wait until you get the notification to apply. The eligibility criteria is also not clear.
Relies on steady cash flow: If your business’s revenue declines, you will be required to pay out of pocket to meet the milestones set for these loans.
Missed payments put your business at risk: Failing to meet the funding agreement terms may result in losing access to your Shopify store.
Reduced cash flow: Though larger loan amounts mean more funding, they also come with larger daily repayment rates, which may result in cash flow problems.
No negotiation: Unlike traditional lending businesses, you cannot work out a deal with Shopify. They initiate and control the whole process and businesses can only comply or decline the funding.
Shopify Loans offer a fast and relatively easy way to access extra cash, but they won’t be the right option for everyone as different businesses have different needs when it comes to obtaining loans and capital.
At Yardline, we match ecommerce sellers with the best funding options available because we believe you shouldn’t have to jump through hoops to find the best rates and terms to meet your business funding needs.
When you fill out an easy 3-minute application with Yardline, you get access to every funding product an ecommerce seller could need in one place:
And that’s just the beginning.
Yardline's ecommerce funding solutions offer small businesses rates as low as 7.49% APR and up to $20mm in funding for your business. Apply today and get funding in as fast as 24 hours.
If you’re ready to order more inventory, launch new products, and run more ads with Yardline's extensive funding solutions, apply for funding today and watch your business grow.