Shopify Capital loans and repayment for merchants in the United States
Shopify Capital offers loans to merchants in the United States. Loans are provided as a lump sum of money called the loan amount, in exchange for a fixed borrowing cost, which is specified as your cost of funds in your loan agreement.
You repay the total payment amount, which covers the loan amount and borrowing cost. Loan repayments are made from a daily percentage rate of your daily sales.
You can choose to repay your loan using a Fixed-fee repayment plan, or a Monthly-fee repayment plan. You can also make manual payments towards the cost of your loan. A fee is the amount you're charged in addition to the borrowed amount when receiving a Shopify Capital loan. The loan amount plus the fee you're charged for borrowing is called the total payment amount.
Loan repayments are made from a daily percentage rate of your daily sales. The repayment continues until the total payment amount is completely paid off but you must pay off the total payment amount within a maximum term of 18 months. You're also required to meet two minimum payments within the first two 6 month periods. If your sales don't meet the minimum payment, or if a monthly-fee repayment fails, then you might be required to make a manual payment to meet your minimum.
The actual duration you take to pay back your loan might be less than 18 months based on your sales. The specific terms, such as the total payment amount and daily payment percentage, are determined based on your risk profile.
The Shopify Capital loan agreement includes a security interest to business assets known as collateral, in the event that loan obligations aren't met. A UCC-1 financing statement may be filed in connection with your loan based on several factors, including the size of your loan, and facts and circumstances about your business. This means that your loan is a secured loan.
This guide outlines key information when using Shopify Capital, how to apply for a Shopify Capital loan, and how to manage your repayments.
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Types of loan repayment methods with Shopify Capital for the United States
When applying for a Shopify Capital loan, you can choose between 2 types of loan repayment options. Review the following details of each type before choosing which suits your business needs.
Monthly-fee structure
If you choose a Monthly-fee loan structure to repay your loan, then you're charged a fixed fee per month. This is expressed as a dollar amount, and is in addition to your loan repayments that are made using a percentage of your daily sales. Your monthly fee is the same each month, and the total amount you pay for your loan depends on how long you have an active Shopify Capital balance. With the monthly-fee structure, the first monthly fee is charged on the day you receive confirmation of your funding and the fee is charged monthly from this date.
For example, if you borrow $100,000 USD and your monthly fee is $1,400 USD, then you'll pay $1,400 USD in fees each month that you have an active Shopify Capital balance, in addition to your loan repayments from daily sales. If you experience an increase in sales and you pay your loan amount back in 3 months, then the cost of the loan repayment fees would be $4,200 USD. If your sales maintain the same pace and you take 11 months to repay your loan, then the cost of the total monthly fees would be $15,400. The faster you repay your Shopify Capital loan, the less the total cost of the loan.
Fixed-fee structure
If you choose a Fixed-fee loan structure to repay your loan, then you pay a single fixed fee for the duration of your loan in addition to your loan repayments that are made using a percentage of your daily sales. This is called a factor rate and is based on a percentage of your loan amount. The fee is fixed no matter how long it takes you to repay your loan. Repayments are made with a percentage of your daily sales. With the Fixed-fee loan structure, you're provided with a fixed amount your loan will cost during your application for Shopify Capital. This means you know the total cost of your loan up front and can plan your finances in relation to your loan repayments.
For example, if you borrow $100,000 USD with a fixed fee of 13% of your loan amount, then the cost of borrowing is $13,000 USD in addition to your repayments from daily sales. If you experience an increase in sales and you pay your loan amount back in 3 months, then the cost of your fixed fees is $13,000 USD. If your sales maintain the same pace and you take 11 months to repay your loan, then the cost of your fixed fees is still $13,000 USD.
Apply for a Shopify Capital loan in the United States
Eligible merchants in the United States can request a loan and access funding options on the Finance page of the Shopify admin. Funding isn't guaranteed, and an offer to apply might expire without notice, or the funding amount might change.
You can customize the funding offer that you want to apply for, based on available offers. The funding terms differ based on factors such as the loan amount, the total payment amount, and the daily repayment percentage, and they adjust automatically based on the Shopify Capital amount but can't be customized independently. After you apply for funding, you can't change the offer amount.
After you apply for a loan, your application for funding is usually reviewed within 1-3 business days, although it might take longer in some cases. If your application is approved, then the loan amount is deposited into your business bank account. Following the loan disbursement, a daily repayment percentage based on your store's daily sales will be applied starting within two business days after the loan disbursement.
Steps:
From your Shopify admin, go to Finance.
In the Accounts section, click Capital.
In the funding offers section, select one of the following options:
- Monthly-fee loans
- Fixed-fee loans
In the funding offers section, take one of the following actions:
- Select one of the displayed offers and then review the terms and details.
- In the Custom amount section, enter a custom amount, and then review the terms and details.
Click Apply now on the offer you want to choose.
Verify your identity and business details for Shopify Capital.
In the Review loan terms and submit your application dialog, click Merchant Loan Agreement, and then review the terms of the agreement carefully before submitting your application.
Optional: Click Financial Disclosures and then review the financial disclosures provided based on your location in the United States.
Optional: If you aren’t currently using Shopify Payments, then click Change my payments provider to Shopify Payments.
Click Submit application. You might be asked to verify your details for Shopify Capital, even if you have previously received funding through Shopify Capital.
After you receive the loan, the daily repayment based on your store's daily sales begins within two business days.
Requesting another Shopify Capital loan in the United States
You might qualify for a second loan before you have repaid an existing loan in full. If you're eligible for a second loan, then new funding options are displayed on the Finance page in your Shopify admin. If you're approved for a second loan, then you receive the funds immediately but you aren't charged repayments until your first loan has been repaid.
View your loan payment details with Shopify Capital for the United States
After you receive your loan, you can track the remaining balance of your total payment amount from the Finance page of your Shopify admin under Accounts. From the Capital page, you can view the following repayment information:
- The current balance of the total payment amount.
- The amount of the total payment amount that has been repaid.
- Payment transaction history.
In the all transactions report, the Total sales column displays each day's sales revenue, and the Amount column displays how much of that revenue is repaid to Shopify Capital.
Managing your repayments with Shopify Capital for the United States
To manage your Shopify Capital repayments, review the following information on minimum payments, loan repayment time frames, and the effects of late repayments.
Calculating your daily loan repayment with Shopify Capital for the United States
Your daily payment is based on a percentage of all sales that are associated with your Shopify account and the services that are provided under your account.
This includes sales on your Shopify online store, at your retail locations, from any sales channels that you have, and through any apps, such as Shopify Marketplace Connect and Shopify Collective.
Daily sales revenue is calculated using the final total transaction amount for each day. This calculation includes all orders marked as paid on that day, regardless of the order source, the payment processing method that was used, or whether the order was later refunded or cancelled. The total transaction amount also includes all charges, such as shipping and handling, as well as any applicable sales taxes, such as duty and value-added taxes. The daily payment percentage is applied to the total transaction amount.
Test orders that you place when Shopify Payments is in test mode aren't included in the repayment calculation. If you place an order without test mode activated, then the order is included in your store's sales revenue for the day's repayment calculation.
No payment is taken on days when there are no sales associated with your Shopify account or the services provided under your account.
Minimum payments with Shopify Capital for the United States
New Shopify Capital loans will include two minimum payment thresholds. These changes are outlined in the Capital loan agreement terms. Shopify Capital will review your progress at the 6-month and 12-month marks within the loan term to determine if you meet these minimum payment thresholds. These evaluations are important to help ensure that you're making progress towards paying your loan.
The minimum repayments are 30% of the total loan by the 6-month mark and 60% of the total payment amount by the 12-month mark. These payments are calculated based on a percentage of your daily sales, known as the daily payment percentage. These minimum payments are in place to help you stay on track with your loan repayment.
If you fail to meet the minimum payment threshold during these evaluation points, then it might result in an event of default under your loan agreement. Refer to your loan agreement for more details on the actions that might be taken if you miss your minimum payments and an event of defaults.
Repay the balance of your loan with Shopify Capital for the United States
You have the option to manually pay back any amount over $1 USD towards your loan or clear up to the entire outstanding balance. The payment is deducted from the same business bank account linked to your Shopify Payments account.
Steps:
From your Shopify admin, go to Finance.
In the Accounts section, click Capital.
Click Make a payment.
Choose the amount that you want to pay:
- To make a manual payment, enter the amount in the Custom amount field.
- To pay the full amount, click Full remaining balance.
Click Next step, and then review the amount to be repaid.
Click Make a payment.
You receive a confirmation email when your loan repayments are complete.
Loan repayment time frame with Shopify Capital for the United States
The maximum term for new Shopify Capital loans is 18 months, within which the total payment amount must be fully received. Shopify Capital loans are designed with a repayment structure based on a percentage of your daily sales, meaning that the actual duration needed to repay the loan could be less than 18 months.
If your sales slow down so that you aren't on track to meet the maximum term of 18 months, then you could be in default under your loan agreement. Therefore, it's essential to monitor your loan payment balance and make a manual payment to avoid defaulting on your agreement.
Failed Shopify Capital payments with Shopify Capital for the United States
If your debit payments are paused or fail, then you might be in default of your loan agreement. In the event that your Shopify Capital repayment fails for the day, there are a few options available to address the situation:
- Automatic repayment: If the debited loan repayment fails, then Shopify won't attempt to debit the payment again. However, your next day's loan repayment, based on the daily repayment rate calculated from your store's daily sales revenue, will continue to be debited as usual.
- Manual payment: Alternatively, you have the option to make a manual payment to cover the repayment failure. This allows you to proactively address the missed payment and ensure your loan repayment remains on track.
Download your balance letter with Shopify Capital for the United States
You can download a balance letter from the Finance page of your Shopify admin. You can use the balance letter to show your bank that you no longer have any financial obligation, or what your current balance is.
Steps:
From your Shopify admin, go to Finance.
In the Accounts section, click Capital.
Click View all transactions.
Click Export, and then click Balance letter.
Save the balance letter to your device.