Shopify, a Canadian e-commerce company and platform for online stores and retail point-of-sale systems, is expanding its loan services to include new customers who might otherwise be ignored by banks.
The fintech company has launched starter loans for U.S. businesses that are just getting started.
With an initial loan of $200 dollars, Shopify says eligible merchants can use the money to build their brand, add inventory, or experiment with marketing to grow their business.
By reaching small business owners at an early stage, Shopify can deepen its relationships with clients, Bank Innovation reported.
There’s a lot of competition out there, but it’s not coming from banks.
The global financial crisis of 2008 coupled with regulation and capital costs have made it difficult for small and medium-sized enterprises to secure financing.
“For traditional banks, extending credit to small businesses is often unprofitable once risk profiles are taken into consideration,” Finextra reported.
Other e-commerce platforms that lend money include Amazon, eBay, Square and PayPal. Digital lenders such as OnDeck, Kabbage, Bluevine and SellersFunding also hope to reach business customers who would otherwise be ignored by large banks.
“(Alternative lenders) have better data than a bank would have and can offer loans to sellers who would have no access to funding,” Juozas Kaziukėnas, CEO of e-commerce research firm Marketplace Pulse, recently told Bank Innovation. “It’s the issue of being too small for a bank and, even if they talk to you, you don’t have enough history of business execution to be a bank client.”
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The Shopify starter loans come with no credit check, according to Shopify.
Shopify supports operations for more than 1 million merchants, according to Bank Innovation.
It has been offering loans through its Shopify Capital program on its platform since 2016 to the tune of $750 million-worth in 14 states. Starter loans will support businesses at their earliest stages of development, said Kaz Nejatian, vice president and general manager of Shopify Financial Solutions.
The important selling point is the simplicity and speed of the qualification process, Nejatian said.
“Open up a store, link your bank account and you qualify after the first month for your loan. You don’t need to have a business plan, you don’t have to have any sales information and you don’t need to give a personal guarantee or your income,” Nejatian said. “The idea here is to make it a little bit easier to buy your first marketing campaign, or buy your first inventory.”
Shopify Capital loans are available to merchants who use Shopify Payments, which is most of them, according to a company spokesperson.