Shopify expands capital lending program to help Canadian merchants weather COVID-19

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Financial Post | James McLeod | Apr 20, 2020

make commerce great - Shopify expands capital lending program to help Canadian merchants weather COVID-19Merchants on the platform will qualify for funds ranging from $200 all the way up to $500,000, depending on the nature of their business

Shopify Inc. will begin providing cash advances directly to online merchants in Canada, as the Ottawa-based ecommerce giant rushes out products to support small businesses through the COVID-19 pandemic.

In an interview with the Financial Post, chief operating officer Harley Finkelstein said that merchants on their platform will qualify for funds ranging from $200 all the way up to $500,000, depending on the nature of their business.

Originally launched in 2016, Shopify Capital was originally only available to ecommerce merchants in the United States, but in late March the company expanded eligibility to the United Kingdom.

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Shopify took great pains to emphasize that the Shopify Capital program provides “cash advances” — not loans — to the merchants who use their platform.

“It’s not a loan. It’s a cash advance, because if you don’t sell anything tomorrow, we’re not taking anything out,” Finkelstein said.

“No credit checks, no deadline on the repayment. The business is not obligated to pay for anything if they’re not making sales. There’s no interest; it’s a factor rate, which is different. And it’s not secured with any collateral.”

The cash advances are insured by Export Development Canada, and Shopify says that the advances are low risk and seamless, because the company can see the merchant’s selling history and has all of the necessary financial data to make underwriting decisions.

Finkelstein said Shopify is adjusting eligibility criteria on the fly, as the COVID-19 pandemic upends markets and dramatically changes consumer behaviour.

“It’s really good to be a tech company in that way, because we can basically change our underwriting algorithms, we can change our machine learning, kind of on a dime,” he said. “So we don’t necessarily need to look back over a year, we can look back over a week or two or three, and say, ‘OK, we see how this business is changing.’”

Finkelstein used a meat wholesaler in Ottawa as an example of how Shopify Capital can help.

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“If you’re going to change your business from being a wholesale meat supplier for restaurants to being a direct-to-consumer meat retailer like premiummeats.ca, you may actually need a little bit of capital to change those things around,” he said.

“You may need money for marketing, you may need money for inventory, so waiting three weeks in this current climate is not acceptable.”

In March the company also announced that it will make an extra US$200 million available for Shopify Capital. With more than US$800 million already provided in cash advances since the program started in 2016, the company is on pace to pass the $1 billion mark this year.

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