As the name implies, Shopify Capital is a division of Shopify. The funding program features cash advances and loans that are only accessible to select Shopify merchants. It is an excellent option for businesses that use the Shopify platform, as it features flexible repayment terms and fast funding.
By contrast, FundKite is available to qualifying businesses, even if they aren’t affiliated with Shopify. It is an ideal option for businesses that do not qualify for traditional loans.
This guide explores the key benefits and drawbacks of each funding option to help you make an informed decision.
What is Shopify Capital?
Shopify Capital is a financing program offered by Shopify, designed to help entrepreneurs grow their businesses. It provides merchant cash advances and loans to eligible businesses based on the store’s location, history, use and interaction with the Shopify platform. The program’s repayment terms are also flexible and allow merchants to pay back their loans at a pace that works for them.
How Does Shopify Capital Work?
Shopify Capital provides business funding solutions for entrepreneurs using the Shopify platform. When you qualify for this program, you can obtain financial support in the form of merchant cash advances or Shopify Capital loans. These funds can be used to grow your business, purchase inventory, or enhance your marketing efforts.
Here’s an overview of how it works:
- Log in to your Shopify account: To get started with Shopify Capital; you’ll first need to log in to your Shopify account and determine your eligibility. The platform will check your store location, history of use and interaction with Shopify to determine the potential funding options available to you.
- Review funding options and accept your offer: There are two types of funding options that may be offered by Shopify Capital – loans and merchant cash advances. When you receive a Shopify Capital loan, you’ll be given a lump-sum loan amount in return for a fixed borrowing cost. The total payment amount will include the loan amount and the cost of funds. On the other hand, Shopify Capital merchant cash advances are provided in exchange for a percentage of your future sales revenue.
- Use the funds however you see fit: Once you receive your funds, you can allocate them to various aspects of your business. For example, you could use the funds from a loan to purchase inventory, expand your team or invest in marketing initiatives.
What is FundKite?
FundKite is a financing option that provides businesses with financial assistance in the form of loans or advances. It offers advances up to $2 million, which can be helpful for businesses of various sizes with different financial needs.
How Does FundKite Work?
When operating your business, you might need additional funding to fuel your growth or manage cash flow. FundKite provides an alternative financing solution for businesses seeking funds, including Shopify merchants.
Below is an overview of what to expect:
- Apply for funding: You need to submit an application and provide your recent bank statements. This ensures that FundKite has a clear understanding of your financial situation and the performance of your business.
- Receive a loan offer: Once you’ve submitted your application, FundKite will review it and likely offer you a financing solution tailored to fit your company’s unique funding needs. This could include merchant cash advances or loans, with loan amounts ranging from $200 to $1,000,000.
- Accept your offer: Next, you’ll be required to review and accept the offer provided by FundKite. It will include the loan amount, terms, and payment structure.
- Gather the requested documentation: After accepting the offer, you’ll need to submit additional business documents, as required by FundKite. These documents may include proof of ownership, tax returns and other legal or financial paperwork.
- Receive funding: FundKite will disburse the funds to your business account. You can then use the funds to manage cash flow, invest in new opportunities or expand operations.
Shopify Capital Vs. FundKite: How To Choose
Services and Features
Shopify Capital features loans and cash advances available exclusively to merchants using Shopify as their eCommerce platform.
FundKite offers a variety of financing solutions for small businesses, including merchant cash advances, short-term loans and invoice factoring.
Rates and Fees
Shopify Capital does not disclose specific rates. However, it is known that they charge a fixed fee that you agree to at the start of the funding agreement, and it does not change throughout the repayment period.
FundKite calculates rates based on their evaluation of your business, including factors such as credit score and business performance. They charge a factor rate, which is multiplied by the loan amount to determine your total borrowing costs.
To be eligible for Shopify Capital funding, you need to have an active Shopify account and meet certain sales and account history criteria. The specific requirements are determined during the application process.
FundKite typically works with businesses that have been operational for a minimum of 6 months and have gross monthly revenue of $10,000 or more. You should also have a credit score of at least 500 and the ability to pass a background check.
Ease of Application
With Shopify Capital, the application process is relatively simple and takes place within your Shopify account. Shopify uses your sales data for the evaluation, which minimizes the paperwork. You can simply view funding offers in your account’s settings under “Capital.”
FundKite adopts a more traditional loan application process, which includes submitting business financial documents and personal information for review.
Repaying a loan or advance from Shopify Capital is done automatically as a percentage of your daily sales. This means your repayment rate adjusts based on your business performance. And if there is no sales activity through Shopify for the day, repayment will not be made. (Note: The maximum repayment term is 12 months).
FundKite also offers flexible repayment options, including daily or weekly repayments, depending on the type of financing you choose. (Note: FundKite generally caps the loan repayment period at 18 months).
Customers appreciate the convenience and seamless integration of Shopify Capital with their Shopify stores. Users often mention the quick, hassle-free funding experience.
FundKite has also received positive feedback from business owners who highlight their flexible financing solutions and responsive customer support.
The Pros and Cons of Shopify Capital
- Easy application and funding process
- A wide range of funding amounts
- Less costly than other short-term loans and merchant cash advances
- Affordable repayment options
- Convenient online management system
- Limited to Shopify users
- Financing offer required to apply for funding
- Frequent repayments are not ideal for companies with fluctuating revenue
- No long-term repayment periods
The Pros and Cons of FundKite
- High loan amounts of up to $2,000,000
- Available to all small business owners
- Perfect credit isn’t required to secure funding
- Straightforward and simple application process
- Not ideal if you’re seeking long-term financing
- Caters to users of the Shopify e-commerce platform
- Requires frequent repayments
- Interest rates and other borrowing costs could be on the higher end
When to Choose Shopify Capital
Consider choosing Shopify Capital when your Shopify store needs additional funds to keep bestsellers stocked, boost your marketing efforts or expand your team. These loans can help you meet the financial demands of running an online retail business, from buying inventory to covering advertising costs.
Choosing Shopify Capital can also benefit your business due to its founder-friendly capital options. As a Shopify merchant, you can have more control over your financing, as the borrowing cost is fixed, and your payments are automatically deducted from your store’s revenue. This pay-as-you-sell model ensures you retain more cash on hand when your sales volume is lower.
The process to apply for Shopify Capital is also streamlined, with eligibility determined during two stages of underwriting. If you are pre-qualified, you can submit an application for funding, which then undergoes review by the Shopify Capital team.
When to Choose FundKite
If you’re considering funding options for your Shopify business, FundKite can be an excellent alternative to Shopify Capital. Known for offering alternative financing solutions, FundKite caters to businesses in need of short-term loans or working capital solutions.
When deciding whether to opt for FundKite or Shopify Capital, several factors come into play. First, consider the financing amount you need. While Shopify Capital loans range from $200 to $1,000,000, FundKite may offer more flexibility in loan sizes, depending on your specific business requirements and revenue.
Another aspect to consider is the speed of approval and fund disbursal. With Shopify Capital, you can expect the approval process to take 2-5 business days, while FundKite may offer funding in as little as 24 hours. This can be crucial for your business when facing cash flow emergencies or unexpected expenses.
Furthermore, FundKite tailors its financing solutions to your business preferences and needs. This means you can expect personalized and customized financial products designed to help you achieve growth and expansion. In terms of repayment, FundKite’s options may differ from Shopify Capital, offering more variety to choose from.
Conclusion: Shopify Capital Vs. FundKite
Both Shopify Capital and FundKite offer small businesses a viable alternative to traditional lending institutions. Each platform has its own unique features, along with pros and cons and cons to consider when evaluating your options. Ultimately, the best choice will depend on your needs and business goals.