by peterjancelis on 4/27/16, 2:02 PM with 42 comments
by notpeter on 4/27/16, 3:19 PM
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
by kennywinker on 4/27/16, 2:40 PM
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.
by callmeed on 4/27/16, 5:48 PM
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 when you have some large/long-term enterprise contracts and need to ramp up production fast (eg Wal-Mart wants 100K of your widgets or the State of CA just ordered $4M worth of software from your 3-person shop). Even then, there are usually other sources of capital with better terms available.
by rcar on 4/27/16, 6:05 PM
As a one-time/infrequent shot, it's actually a really nice lending product in that it's not going to cause undue strain on your business if your sales start to flag since the payments go down along with it (and because the total interest you pay is fixed, the implied APR is actually better that way). Where they can become problematic is when a merchant keeps rolling one after another of these since then you're paying a high price for credit and would be better off with a small business credit card or line of credit.
Definitely would like to see more transparency with these either way though. When used properly, both the lender and the borrower win, and so I find it odd that lenders try to obscure the details.
by tyingq on 4/27/16, 4:40 PM
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.
by patrickg_zill on 4/27/16, 4:57 PM
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...
by oisino on 4/27/16, 10:21 PM
by josep2 on 4/27/16, 7:03 PM
by tkjef on 4/27/16, 7:54 PM
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.
by eloff on 4/28/16, 3:52 AM
by vincefutr23 on 4/27/16, 2:23 PM