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Looking for funding to grow and scale your Shopify store? Check out these top 7 Shopify financing options, including Shopify Capital, crowdfunding, and more.

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Hey Shopify merchant, are you looking to grow your store but don’t have the cash to do it?

Perhaps you’ve considered some funding options but don’t know the one that best suits your store.

Thankfully, this blog post is for you. Here, we unveiled the top seven funding options for Shopify merchants. Whether you’re just starting or scaling your online store, these financing opportunities will empower your business growth. 

Let’s begin!

Shopify Capital

Not many merchants know this, but Shopify offers a financing program for its users.

Shopify Capital offers loans and cash advances to merchants and eligible businesses based on criteria like the shop’s history, location, and affiliation with the platform.

The leading e-commerce website announced Shopify Capital on April 27th, 2016, and since then, it has helped countless merchants sustain and promote their online businesses.

Shopify Capital offers a fast and simple way to grow your business by providing capital to invest in new inventories, diversify your offerings, or even set up a physical shop and hire staff.

However, not all businesses can opt for Shopify Capital.

Eligibility for Shopify Capital

The first step to eligibility for this funding opportunity is that you must be a Shopify store owner.

Secondly, the Shopify Capital funding program is available only in the United States, Australia, Canada, and the United Kingdom.

So, if you’re a Shopify store owner in the eligible regions, this may be your opportunity to take your business to a new level.

Apart from your business location, some other factors that may determine your eligibility and how much you receive are:

• Your sales history
• Engagement with Shopify 
• Business credit history (person credit history may not be necessary)
• Payment disputes
• Buyer activity
• Billing issues

If you are eligible, you’ll be notified on your Shopify admin Home page and via email.

Otherwise, you won’t receive an offer.

Check out this guide for more information on how Shopify Capital works.

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Crowdfunding

If you’re a Shopify merchant living outside the Shopify Capital eligible regions or don’t qualify for the funding opportunity, crowdfunding is another one you may love.

Crowdfunding involves raising funds for your store by collecting small amounts of money from many individuals, especially through social media or online platforms.

It’s an opportunity for your business to access capital without sole reliance on conventional sources like banks or investors.

Furthermore, crowdfunding has become easier to set up, especially with social media and online platforms.

The issue lies in choosing the right crowdfunding platform.

But don’t worry. Here are seven of the best crowdfunding platforms we recommend:

• Kickstarter
• Wefunder
• Indiegogo
• Patreon
• GoFundMe 
• Fundable
• SeedInvest

Choosing the right platform is only part of the equation. You must also grow your crowdfunding campaign to ensure its success.

How to Run a Successful Crowdfunding Campaign

• Set and focus on a clear goal
• Learn from the experts
• Leverage your email list for promotion
• Consider working with influencers
• Offer donors incentives based on their donations
• Familiarize your audience with your chosen platform

Pre-orders

If you’re an avid shopper, you’ve probably heard of pre-orders and know how it works.

If you don’t, no worries.

Pre-orders mean when your customers pay for a product before they’re available.

For example, if you’re planning to sell a new product in your Shopify store, you could introduce the product to your customers and allow them to pay for the particular item even before you start selling.

This way, you can raise capital to produce or mass purchase the product you plan to sell.

Smart, right?

However, your customers won’t pre-order a product if they’re not excited about it.

So, here are a few ways to make pre-order work for you:

• Promote pre-orders through influencers or social media ads.
• Always build excitement for a particular product before making it available for preorder. Release teasers and posts on your blog or social media.
• Include attractive rewards and incentives for customers who pre-order. This serves as an extra benefit of paying in advance.
• Be transparent about delivery times, potential delays, and any changes in product availability
• Encourage customers to leave reviews once they receive their pre-order items to build trust.

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Inventory Financing 

Did you know you can use your shop’s inventory as collateral for a loan?

That’s how inventory financing works.

Inventory financing is a business funding method that uses your business inventory as collateral to obtain a loan or credit line.

This helps with cash flow and is beneficial for businesses with fluctuating demand.

However, the lender might claim the inventory as repayment if you fail to repay the loan.

How Inventory Financing Works

• Inventory financing works starting with your application.
• You apply for inventory financing from specialized lenders. The application process includes sales history, business details, and inventory requirements.
• Afterward, lenders assess the inventory’s value and condition to determine loan terms.
• If approved, you’ll receive funds to purchase and store inventory.
• As your products sell, you use revenue to repay the loan while maintaining stock levels.

Benefits of Inventory Financing for Shopify Merchants

Apart from access to funding, inventory financing offers other benefits like:

Seasonal Adaptability

It helps you meet peak demand by securing stock when needed.

Growth Catalyst

Fuels business expansion by diversifying your product offerings.

Cash Flow Optimization

Keep capital free for essential expenses.

Competitive Edge

Ensure timely order fulfillment, boosting your customers’ satisfaction.

Risk Mitigation

Safeguard against market fluctuations with available capital.

Inventory financing empowers Shopify merchants to thrive in a dynamic e-commerce landscape.

SBA Loans

Another out-of-the-box finance strategy you can use to grow your Shopify business is an SBA (Small Business Administration) loan.

These loans, backed by the Small Business Association (SBA), offer favorable terms and lower interest rates, making them an excellent funding choice for your small business.

But how can you acquire SBA loan funds?

How to Get SBA Loans

From our experience, here’s how to access an SBA loan:

• Choose an SBA-approved lender
• Ensure your Shopify store meets SBA criteria. They include factors like size and creditworthiness.
• Craft a robust business plan and financial statements, then submit them alongside your application to the lender.
• The Small Business Association guarantees a portion of the loan, reducing the lender’s risk and making approval more accessible
• Once approved, you can utilize the funds for working capital, inventory purchase, or business expansion.

One primary reason we recommend SBA loans is that you minimize borrowing costs since they offer low interest rates.

Other benefits of SBA loans for Shopify merchants include:

• They offer longer repayment terms than most loans.
• Loan funds support diverse usage.
• Successful repayment can boost your credit profile.
• You can seek SBA guidance throughout the loan process.

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Business Line of Credit Loans

Business lines of credit loans are another excellent funding options for Shopify merchants.

A business line of credit is a flexible financial arrangement with which you can borrow money up to a predetermined credit limit, similar to a credit card.

However, unlike a traditional loan where you receive a lump sum, with a business line of credit, you can draw funds as needed, repay them, and then use the credit again.

How Business Line of Credit Loans Work

Application

Apply through lenders or online platforms, providing business and financial information.

Credit Limit

Upon approval, you receive a credit limit based on your creditworthiness and business standing.

Flexible Access

Borrow funds when necessary, ideal for managing inventory and expenses, or seizing growth opportunities.

Repayment

Pay interest only on the amount used, with the credit becoming available again once repaid.

Advantages for Shopify Entrepreneurs

• These loans are flexible and address diverse financial needs, from seasonal inventory fluctuations to marketing campaigns.

• Business lines of credit loans are cost-efficient since interest is charged only on borrowed amounts. This potentially reduces borrowing costs.
• They offer effective cash flow management, ensuring funds are available when required.
• Facilitate business expansion by accessing funds without delays.
• Responsible usage can boost your credit profile, improving your financial standing.

Equity Financing

Equity financing is a strategic funding approach that involves selling ownership shares (equity) to investors, typically angel investors or venture capitalists, in exchange for capital.

For effective equity financing, you must seek and connect with potential investors, presenting your business and negotiating terms.

The investor then assesses your business’s value to determine its worth. After which they buy a portion in exchange for funding.

Investors inject funds for business expansion, product development, or market entry.

Investors become stakeholders, sharing in the business’s success and potentially its profits.

Benefits of Equity Financing

As a Shopify business owner, the benefits equity financing offers you include:

• Equity financing offers substantial capital for growth without immediate repayment obligations.

• Investors bring industry knowledge, mentorship, and valuable connections to support business growth.
• Investors share in both risks and rewards, aligning interests in long-term success.
• It aligns investor and entrepreneur interests in the business’s long-term success.
• Unlike loans, equity financing doesn’t involve ongoing interest payments, easing cash flow management.

In summary, equity financing is a strategic choice for Shopify entrepreneurs, providing access to capital and valuable support for scaling their e-commerce businesses.

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How to Choose the Right Shopify Funding Option

To choose the right funding option for your Shopify store, you must:

Assess Your Needs

Start by understanding your funding requirements. Are you looking to expand your marketing efforts, stock inventory, or invest in technology? Clearly define your objectives.

Consider Your Financial Position

Next, evaluate your current financial situation, including cash flow, revenue, and creditworthiness. Your funding options might depend on your financial profile.

Research Funding Options

Explore all available options. Each comes with its terms, interest rates, and eligibility criteria.

Match Funding to Purpose

Align the chosen funding source with your specific needs. For example, we recommend inventory financing for stock-related needs or equity financing for long-term growth.

Review Costs and Terms

Carefully assess each funding option’s associated costs, including interest rates, fees, and repayment terms. Ensure they fit your budget and cash flow.

Evaluate Risk Tolerance

Don’t risk beyond your comfort level. Loans require repayment, while equity financing involves giving up ownership. Choose an option that aligns with your risk tolerance.

Explore Government Assistance

Investigate government grants or programs available to support your e-commerce business. These can offer favorable terms and conditions.

Seek Expert Advice

You can always consult with financial advisors or business mentors. They can provide valuable insights and help you make an informed decision.

Understanding Terms and Conditions

Before committing, read and understand all terms and agreements. Clarify any doubts and ensure you’re comfortable with the terms.

Plan for Repayment

Create a realistic repayment plan to meet your obligations without straining your finances.

The right funding option for your Shopify store depends on your unique needs, financial situation, and risk tolerance.

So, carefully consider and research your options before choosing the one you feel best supports your e-commerce venture’s growth and success.

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Final Thoughts on Shopify Financing Options

With eCommerce becoming more competitive than ever, securing enough funding is key to growing and scaling your Shopify store.

However, pulling this off is more challenging than it seems. But this guide can put you on the right footing. We recommend assessing your needs, reviewing your financial position, and understanding the terms before deciding on a funding option.

Additionally: 

• Consider your short-term and long-term goals. What do you want to achieve with your funding?
• Evaluate your financial situation. How much money do you need? What are your monthly expenses?
• Research different funding options. Compare interest rates, fees, and repayment terms.
• Talk to a financial advisor. They can help you choose the best option for your needs.

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