Managing payments for your Shopify Term Loans
To effectively manage your payments for Shopify Term Loans, it's important to understand how payments work. Payments will be automatically debited from the bank account linked in your Shopify admin, which is referred to as the Shopify Merchant Business Account (SMBA) in the Merchant Loan Agreement.
You can have only one business bank account in your Shopify admin, and it's crucial to ensure that this account maintains sufficient funds to cover the periodic payments.
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Payment schedule for Shopify Term Loans
Choose a payment schedule that suits your needs: weekly or monthly. The duration within which you must repay the loan is referred to as the term. For example, you can select a 10-month term or a 12-month term. This means that your loan must be fully repaid within this time period.
Automatic debits
All weekly or monthly payments are automatically debited from the bank account linked in your Shopify admin.
Monthly payments
When you choose monthly payments, they're typically due on the same calendar day each month. For example, let's consider June 16 as the Effective Date of the agreement, which is when you receive the funds. In that case, your first monthly payment will be due on July 16, followed by subsequent payments on the same calendar in the following months.
However, there are exceptions to monthly payments being due on the same calendar day each month. These exceptions include:
- If the Effective Date falls on the 29th, 30th, or 31st of the month, then your first monthly payment will be due on the 1st of the following month. For instance, if the Effective Date is January 31st, then your first payment will be due on March 1st.
- If a payment is scheduled to be due on a weekend or bank holiday, then the debit will be initiated on the following calendar business day.
Weekly payments
If you prefer weekly payments, then they will be due on the same day each week. For example, if today is Wednesday, the Effective Date, then each payment will be due on the same day of the week, which is Wednesday.
Payment amounts
Each payment is calculated by dividing the total payment amount by the number of weeks or months in the term. The total payment amount includes the loan amount and the cost of funds.
Example: Calculating payment amount for a $3,000,000 USD loan
- Total payment amount: $3,300,000 USD
- Loan amount: $3,000,000 USD
- Cost of funds: $300,000 USD
- Term: 12 months
- Monthly payment: $275,000 USD
To calculate each monthly payment, divide the total payment amount ($3,300,000 USD) by the number of months in the term (12). This results in an equal monthly payment of $275,000 USD.
This means that if you choose a 12-month term with a total payment amount of $3,300,000 USD, then your monthly payment will be $275,000 USD.