Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Shopify Capital

shopify.com

Post reply on HN
Print view View original

31–40 of 45 posts

Re: Shopify Capital

#31

Post by pbarnes_1 »

patio11 wrote: post #4
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…

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 p…

SBA loans are not that onerous -- go to a credit union (https://www.sffirecu.org/business/loans/small-business-admin...) instead of a big bank and you can get it done.

A Chase (or whatever) business card at 13% is still better than this since you can pay it back early.

Re: Shopify Capital

#32

Post by tkjef »

merchant cash advances have been around since before the internet. it is an EXTREMELY common marketing tactic in merchant services.

so shopify sells merchant services, and uses one of the most common marketing tactics. and they made a fancy landing page.

it's a tactic to prey on desperate businesses where they can be taken at the source of their money before it's even put into their account.

Re: Shopify Capital

#33

Post by notahacker »

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…

Here in the UK, every other fintech startup seems to be based around factoring or invoice receivables financing...

If you're a business which experiences cashflow issues, I'm suspect it works out cheaper than a revolving credit facility or a series of regular loans, but like any flexible credit facility, it's a lot cheaper if you don't need to use it at all.

Re: Shopify Capital

#34

Post by gamblor956 »

samstave wrote: post #29
jsprogrammer wrote: post #23

Earlier quoted context omitted.

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 s…

Unrelated parties are not required to charge interest on loans. (However, interest generally will be imputed on loans between related persons.)

Re: Shopify Capital

#35

Post by aianus »

gamblor956 wrote: post #34
samstave wrote: post #29

Earlier quoted context omitted.

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 s…

Unrelated parties are not required to charge interest on loans. (However, interest generally will be imputed on loans between related persons.)

> Unrelated parties are not required to charge interest on loans. (However, interest generally will be imputed on loans between related persons.)

You're never required to charge interest, but in most situations if you receive a below-market loan (from anyone other than a spouse) over $10,000 the IRS will impute interest.

Re: Shopify Capital

#36

Post by jsprogrammer »

narrowrail wrote: post #26
jsprogrammer wrote: post #16

Earlier quoted context omitted.

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?

I mean to say that the approval isn't really instant, as Shopify has already examined your cash flow and made a specific determination to market the offer to you.

The claim that no docs are required is also specious, as, again, Shopify already knows your personal information and real-time cash flow.

I would assume that the pricing is customer specific, which would make it more difficult to publicly advertise a price.

Re: Shopify Capital

#37

Post by oisino »

As someone who has built a lot of saas products off Shopify this makes total sense. Square, Amazon, and PayPal have already gone down this path and proved its highly profitable. I would be curious if Shopify is white labelling a banks offering or if they are making loans a core competency. If the later then its really dangerous for this area is starting to become regulated and is shifting quickly. This risk is one the reasons Square moved away from doing it themselves to actually using third party banking partners to make loans. Also as many of those in the industry already know large loan providers are starting to anticipate a shift in the economy and are moving to invest in collection services rather than sales. If you don't have a competency in making good loans/ collections then you can get in trouble in a down market. That said I do love how companies like Shopify are figuring ways to empower more entrepreneurs to start and grow their businesses. I personally would have though it would have been better for them to open store processing data to qualified third party lenders and provide them an easy way to evaluate, price, and sell loans. This competition would have driven down the price of loans for businesses and Shopify could focus on making great software and just taking a cut off an area that isn't their core focus. Similar model to what has worked for them in other areas outside their core focus (i.e. apps/ theme/ experts market).

Re: Shopify Capital

#38

Post by HappyTypist »

pbreit wrote: post #13
kennywinker wrote: post #12

Earlier quoted context omitted.

Sample size of one, but I have friends who run a small shop doing trade work (earning far less than 1m/year) and they were able to fairly easily get access to 10-20k of loans with interest rates in the <10% ball park (don't know exact numbers, also not mine to share). So to hear that kind of loan has "virtually disappeared" is surprising.

Frequently those 10% loans are for, say, 6 month payback periods so the effective APR is over 20%.

Generally interest is annualised and measured in APR.

Re: Shopify Capital

#39

Post by kennywinker »

tyingq wrote: post #10
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…

>>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.

It's not the lack of specific numbers that I find the most disreputable, it's truth-bending statements like "Merchant cash advances do not have an interest rate."

Re: Shopify Capital

#40

Post by pbreit »

HappyTypist wrote: post #38
pbreit wrote: post #13

Earlier quoted context omitted.

Frequently those 10% loans are for, say, 6 month payback periods so the effective APR is over 20%.

Generally interest is annualised and measured in APR.

Actually, on these types of loans, generally not.

For example: https://squareup.com/capital

I don't really get how they arrive at their numbers but on first glance it looks insane. On the $10k loan with the $1,300 fee. If you had daily sales of $1,000 you'd pay the loan off in 100 days making the APR somewhere around 50%.

They are frequently fee-based, not rate based. And are frequently less than a year with the rate being highlighted, not the APR.

Post reply on HN