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Shopify Capital

shopify.com

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Re: Shopify Capital

#21

Post by fludlight »

mrgreenfur wrote: post #5
kennywinker wrote: post #3

I 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.

Cash flow sweeps are pretty common in commercial banking, even in much larger, market rate, respectable loans. That said, the opaqueness of this product is disconcerting. It seems designed to confuse desperate people.

Re: Shopify Capital

#22

Post by roymurdock »

callmeed wrote: post #15

In case any of you think this is something new, its not. It's called Factoring and its been around since the renaissance: https://en.wikipedia.org/wiki/Factoring_(finance) Of course, when Shopify, Square, and PayPal put their startup-land spin on it and call it "Capital", it sounds cool and new (the fact that they wont use the term says a lot). IMO factoring should only be considered as a last resort of capital or wh…

I wonder what happens if a company goes bankrupt. Does the merchant cash advance contract give shopify some claim to the company's assets?

Re: Shopify Capital

#23

Post by jsprogrammer »

trjordan wrote: post #17
jsprogrammer wrote: post #11

Earlier quoted context omitted.

How is this functionally different from a loan? It appears to be identical.

There's no interest that grows over time. You pay back the same amount. Shopify is betting that they can predict when you'll pay it back, then set a discount that makes them more money than time-based interest. If they lose, they still get their money back eventually, and if they win, hey, that means you grew faster than expected, which is great for everybody.

I don't believe there is a requirement that interest on loans be compounded or time-sensitive.

Re: Shopify Capital

#24

Post by [deleted] »

callmeed wrote: post #15

In case any of you think this is something new, its not. It's called Factoring and its been around since the renaissance: https://en.wikipedia.org/wiki/Factoring_(finance) Of course, when Shopify, Square, and PayPal put their startup-land spin on it and call it "Capital", it sounds cool and new (the fact that they wont use the term says a lot). IMO factoring should only be considered as a last resort of capital or wh…

[deleted]

Re: Shopify Capital

#25

Post by narrowrail »

callmeed wrote: post #15

In case any of you think this is something new, its not. It's called Factoring and its been around since the renaissance: https://en.wikipedia.org/wiki/Factoring_(finance) Of course, when Shopify, Square, and PayPal put their startup-land spin on it and call it "Capital", it sounds cool and new (the fact that they wont use the term says a lot). IMO factoring should only be considered as a last resort of capital or wh…

I always associated factoring with paying someone to handle Accounts Payable at a big company (which is your customer) with an Accounts Payable dept that is difficult to deal with for a small business (that don't have Accounts Receivable). These factoring companies are handed invoices for services rendered and when they collect they give you ~96%.

This is different because Shopify is the storefront/ payment processor, they can collect money when the product is bought; they don't have to negotiate with sophisticated people on when the payment can be made. Shopify is fronting the capital before it's even been collected, where this is not the case in the typical factoring company's business.

Re: Shopify Capital

#26

Post by narrowrail »

jsprogrammer wrote: post #16
homero wrote: post #14

Earlier quoted context omitted.

Instant approval with no docs but much worse hidden rates

According to the marketing you must have an existing relationship with Shopify and be pre-selected by Shopify to "access" a pre-approved amount.

You make a good point point but it was hard to understand the way you phrased it: I think you mean that listing a discount rate (or any kind of pricing) wouldn't make sense because it is customer specific (history/existing relationship) and will vary accordingly?

Re: Shopify Capital

#27

Post by narrowrail »

fludlight wrote: post #21
mrgreenfur wrote: post #5

Earlier quoted context omitted.

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.

Cash flow sweeps are pretty common in commercial banking, even in much larger, market rate, respectable loans. That said, the opaqueness of this product is disconcerting. It seems designed to confuse desperate people.

It appears you are 'chosen' for inclusion into the opportunity based on your business history with Shopify and that they will present you with specific details once you enter the processes. Just evaluate it alongside your local bank's proposal.

Re: Shopify Capital

#29

Post by samstave »

jsprogrammer wrote: post #23
trjordan wrote: post #17

Earlier quoted context omitted.

There's no interest that grows over time. You pay back the same amount. Shopify is betting that they can predict when you'll pay it back, then set a discount that makes them more money than time-based interest. If they lose, they still get their money back eventually, and if they win, hey, that means you grew faster than expected, which is great for everybody.

I don't believe there is a requirement that interest on loans be compounded or time-sensitive.

I think you are correct, it is just that it is actually required that you do charge interest.

However, I worked with a woman who was Jewish. She showed up in a new car one day and we went for a ride.

I asked her how and when she went and got the car.

She said "oh I got a loan from the Jewish community" or something to that effect.

I inquired what that meant; she said that she was able to get a loan from some Jewish social circle and she didn't have to pay interest because she needed someone else from the Jewish circle who was willing to back her and pay the loan of she failed to pay.

I didn't ask what the consequences were if she failed to pay - but she just mentioned that "if you know Jewish people... Getting money isn't hard"

Re: Shopify Capital

#30

Post by [deleted] »

aristus wrote: post #20
callmeed wrote: post #15

In case any of you think this is something new, its not. It's called Factoring and its been around since the renaissance: https://en.wikipedia.org/wiki/Factoring_(finance) Of course, when Shopify, Square, and PayPal put their startup-land spin on it and call it "Capital", it sounds cool and new (the fact that they wont use the term says a lot). IMO factoring should only be considered as a last resort of capital or wh…

I used to work for a cashflow factor in the late 90s. It's a legit business need, but with few legit players. Almost like payday loans for business. It's due for a brand uplift and some visibility.

[deleted]
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