Shopify has revealed two new loan offerings to merchants in what the company has called the “next evolution” of its lending business.
Shopify Capital has provided cash advances and loans to merchants since 2016. The e-commerce giant has now launched a line of credit as well as term loans as part of a recent roundup of new products and features through its winter 2024 Editions showcase. The two offerings are currently available only to merchants in the United States.
Shopify Capital has already provided over $5 billion USD in funding to its merchants since 2016.
In a January 31 post on X, Shopify president Harley Finkelstein said the new lending products are designed to be “completely customizable and flexible,” noting they represent the “next evolution of Shopify lending.”
Shopify’s new line of credit is designed to allow merchants to access only the funding they need, rather than a full limit, and pay interest only on the amount withdrawn. Shopify said the credit limit replenishes as merchants repay, adding that there are no origination or draw fees attached.
The term loan offering allows merchants to make static payments over a fixed payback period. The product allows borrowers to customize their loan amounts, rates, and repayments according to individual business needs. On its website, Shopify said the term loans come with no monthly service fees and no hard credit check cheques.
These latest products come in addition to Shopify’s existing cash advance and capital loan offerings, which do not take equity from merchants, and instead collect a certain percentage of merchants’ sales for repayment.
Shopify says it has already provided over $5 billion USD to its merchants since 2016 through Shopify Capital. Its lending offering officially launched in Canada in 2020 when the e-commerce company invested an additional $200 million in the fund.
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Shopify does not disclose revenues generated from its lending business, however, it was cited as one of the key drivers of Shopify’s revenue growth in the third quarter of 2023 by CFO Jeff Hoffmeister.
Ken Wong, managing director and senior analyst at the brokerage and investment bank Oppenheimer, told The Logic in December that he believes Shopify’s lending business is one of the top drivers of its merchant solutions segment, a key contributor to Shopify’s overall revenue.
The two new lending offerings were part of a larger reveal of Shopify’s latest product launches. The roundup also unveiled a new artificial intelligence (AI)-powered storefront semantic search feature, more checkout extensibility features, and ship-from-store fulfillment.
The startup has also built AI-powered tools for merchants for its Shopify Magic suite, including a media editor that lets merchants use generative AI for product images, and an AI-powered “sidekick,” which has been rolled out to select merchants in early access.
Feature image courtesy Burst. Photo by Avelino Calvary Martinez.