Shopify Capital
shopify.com
Shopify Capital
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Re: Shopify Capital
#2high APRs on this type of thing
Re: Shopify Capital
#3I find the way these programs are presented (Square has a similar offer) to be opaque to the point of dishonesty. How am I able to compare this "interest free" loan with a small business line of credit from the bank?
They offer a chart of what repayment looks like, but no "total interest paid" descriptions. I can't help but worry that the way these are designed is more about skirting regulations and confusing borrowers than they are about offering people something genuinely useful.
Reminds me a little of cheque cashing shops... Find a group who aren't able to access mainstream financial services (in this case small online sellers) and charge them excessive rates for your "generous" offer.
Re: Shopify Capital
#4I find the way these programs are presented (Square has a similar offer) to be opaque to the point of dishonesty. How am I able to compare this "interest free" loan with a small business line of credit from the bank? They offer a chart of what repayment looks like, but no "total interest paid" descriptions. I can't help but worry that the way these are designed is more about skirting regulations and confusing borrowe…
How am I able to compare this "interest free" loan with a small business line of credit from the bank?
If you're able to get a small business line of credit from your bank, take that, it will invariably be superior. Sadly, that product has virtually disappeared from the marketplace for small businesses with revenue less than ~$1 million. The underwriting costs are too high, the product is too risky, and the revenue potential is too low. The bank will, instead, steer you towards credit cards. Credit cards are a wonderful product but they don't substitute for the need.
There exist a bunch of alternative lenders who are eating this space up with pricey-products-which-actually-get-issued. OnDeck gives fairly uncomplicated lines of credit, for example. Their stock offer is 36%. (I have one, and occasionally use it.) Kabbage (love the name) does a merchant cash advance with implied APRs which are even higher. There are more costly options still, including traditional hard-money lenders and merchant cash advance providers.
This offering is closest in character to Paypal Working Capital.
Re: Shopify Capital
#5I find the way these programs are presented (Square has a similar offer) to be opaque to the point of dishonesty. How am I able to compare this "interest free" loan with a small business line of credit from the bank? They offer a chart of what repayment looks like, but no "total interest paid" descriptions. I can't help but worry that the way these are designed is more about skirting regulations and confusing borrowe…
Yup, this seems kind of predatory. Instead of honestly answering what the interest rate is or give an equivalent they wave it away with jargon. Answer after answer is just jargon and more jargon. They don't even show what the total amount paid back is! They instead show very clearly they keep drinking your sales until they decide to stop.
Re: Shopify Capital
#6> "Merchant cash advances do not have an interest rate. Instead, Shopify will purchase a set amount of your future receivables at a discount."
Their page never specifies a "discount" rate and only show the 10% remittance rate. This makes their example table at the bottom near fraudulent because the "daily revenue" column is already discounted. I'd bet their discount rate is the same ~13% it was six months ago [src].
They know your revenue history, so I expect they're offering something which will likely take you 9-12months to pay back at the remittance rate (10%) based on your projected revenue. Note since this isn't a loan, if you pay it back early by growing revenue, Shopify still makes the same returns (13% discount rate) on their capital. Good deal for them, likely comparable to credit card rates for businesses, but since it's cash it's more flexible (pay employees, payoff loans, brides, etc).
[src]: https://twitter.com/seobrock/status/669269206584553473
Re: Shopify Capital
#7Looks very similar to Paypal's offering: https://www.paypal.com/us/webapps/workingcapital/
Beware though. While they pitch it as "no interest, just a fee", the typical effective APR of a PayPal Working Capital loan is between 15 to 30 percent.
I suspect this has similarly high fees, since they seem to be hiding the information.
Re: Shopify Capital
#8I find the way these programs are presented (Square has a similar offer) to be opaque to the point of dishonesty. How am I able to compare this "interest free" loan with a small business line of credit from the bank? They offer a chart of what repayment looks like, but no "total interest paid" descriptions. I can't help but worry that the way these are designed is more about skirting regulations and confusing borrowe…
Also, they say if you don't have any sales, then you don't remit anything
That's a default though
Where do they explain what happens if you don't repay?
Re: Shopify Capital
#9This is a huge thing on Wall Street at the moment.
Bloomberg wrote about a couple of guys that started such a business and got bought for (maybe, exact terms not stated) $60 to $100 million.
http://www.bloomberg.com/news/features/2015-10-06/how-two-gu...
Re: Shopify Capital
#10I find the way these programs are presented (Square has a similar offer) to be opaque to the point of dishonesty. How am I able to compare this "interest free" loan with a small business line of credit from the bank? They offer a chart of what repayment looks like, but no "total interest paid" descriptions. I can't help but worry that the way these are designed is more about skirting regulations and confusing borrowe…
>>opaque to the point of dishonesty
I suspect the fee is not the same for everyone. They probably have some way of judging risk. Which would explain the secrecy.