Shopify Capital • Hacker News Board

Re: Shopify Capital

#41

Post by lightbendover » Thu, Apr 28, 2016, 3:22 AM UTC

kennywinker wrote: post #39

tyingq wrote: post #10

Earlier quoted context omitted.

>>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."

Merchant cash advances (a sizable, although definitely not huge, segment of lending) do not have an interest rate, they have a factor rate, which is an entirely different thing in finance. The factor rate is simply a multiple on the amount advanced (money that the borrower gets now) in order to determine the constant amount that must be repaid to the lender, the right-to-receive amount. Calling it an interest rate would actually be dishonest.

Re: Shopify Capital

#42

Post by eloff » Thu, Apr 28, 2016, 3:52 AM UTC

I hope Stripe borrows this idea, I think it's a great win-win for all parties.

Re: Shopify Capital

#43

Post by howlingfantods » Thu, Apr 28, 2016, 10:08 AM UTC

jsprogrammer wrote: post #11

notpeter wrote: post #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].…

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

Merchant cash advances are technically not loans because you're selling future receivables. The advantage is that these transactions are not regulated like loans and importantly, are exempt from usury laws. That's why annual effective interest rates on MCAs can exceed 100%

Re: Shopify Capital

#44

Post by tyingq » Thu, Apr 28, 2016, 12:11 PM UTC

lightbendover wrote: post #41

kennywinker wrote: post #39

Earlier quoted context omitted.

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."

Merchant cash advances (a sizable, although definitely not huge, segment of lending) do not have an interest rate, they have a factor rate, which is an entirely different thing in finance. The factor rate is simply a multiple on the amount advanced (money that the borrower gets now) in order to determine the constant amount that must be repaid to the lender, the right-to-receive amount. Calling it an interest rate wo…

And the factor rate, I assume, varies based on the amount, and the credit risk of the borrower. Which is why it isn't stated up front.

Re: Shopify Capital

#45

Post by samstave » Thu, Apr 28, 2016, 2:51 PM UTC

aianus wrote: post #35

gamblor956 wrote: post #34

Earlier quoted context omitted.

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.

Interesting, I was loaned enough money to buy a house from a family member, and I was required to pay them back with market interest... Thus my comment was from experience - even though I may be wrong?