There’s no magic formula for business success. And success is different from one business to the next.
But we’ve always had a hunch that having access to the right amount of funding is an important part of the equation. Big or small, just starting out or profitable for a while, every business can benefit from funding to expand their operations.
The problem: most businesses have trouble getting enough financing. This lack of funding adversely affects business growth, particularly among women and minority-owned companies.
We launched Shopify Capital with the aim of addressing this problem. We wanted to help Shopify businesses grow by reducing barriers and making funding fast, simple, and integrated with Shopify. Did it work?
We wanted to find out. So we ran a study to explore the performance of Shopify merchants who received funding through Shopify Capital.
The results were impressive—and we have the data to back it up.
Five years of funding made easy
Since 2016, Shopify Capital has made over $3 billion available to thousands of Shopify merchants, with accessible funding amounts as low as $200 and as high as $2 million.
Five years into providing capital to Shopify businesses, we thought it was time to ask our data scientists: Does the funding provided through Shopify Capital actually help merchants grow?
We won’t keep you in suspense: it has.
Shopify Capital linked to accelerated business growth
So what did the data tell us about the overall impact of Shopify Capital for the entrepreneurs who received funds?
We looked at all the data on merchants who had accepted the first round of funding through Shopify Capital, going back to January 2019. From there, we compared them to another group of merchants who had the same characteristics but did not have access to Shopify Capital.
The impressive results came as no surprise.
We found that Shopify Capital positively impacts merchants’ growth and sales. Shops that received funding through Shopify Capital on average experienced 36% higher sales1 in the following six months compared to their peers.
These funds helped entrepreneurs successfully undertake growth-related activities such as hiring staff, buying inventory, or paying for marketing campaigns—all of which can lead to long-term business success. Below are just some ways we've heard business owners use their funds for growth.
But the real proof is in our merchants’ own experiences.
Alison Ables, owner of Los Angeles–based Prelude & Dawn, is a shining example of growth achieved through Shopify Capital. After just two rounds of funding through Shopify Capital, Alison moved Prelude & Dawn into a new retail space, which helped double the business’ revenue.
“I started borrowing a little bit from Shopify Capital, and that first amount allowed me to get better, and more inventory, which resulted in higher annual revenue,” Alison says.
Over the years, she borrowed additional funding and further improved her entire store, hired staff, and paid for marketing, all of which spurred even more growth.
Creating real business impact
We’ve always provided tools and support to help make merchants successful. But it’s through Shopify Capital that we offer an accessible path to funding.
Alison can speak to that accessibility, “There’s no personal credit check. … It’s just your store’s performance. That was what mattered to me, because I didn't have a personal credit score to get the amount of funding that I needed,” she says.
The process to request funding from Shopify Capital is simple. There’s no hoop-jumping, and funds can be spent however the merchant deems necessary. “You can click on your dashboard and indicate, ‘Hey, I want to borrow $8,000.’ You request the amount, and within days, it’s in your account,” Alison says. “With that influx of cash, you can hire someone new to work at your shop the next week if you want.”
Alison has relied on Shopify Capital several times over the past five years to expand her business, adding new products and catalyzing sales growth in the process.
“I first used Shopify Capital in 2017,” she says. “It was a small amount, but it took me from only being a vintage shop to wholesaling and selling new products.”
Alison believes you have to spend money to make money, and this proactive mindset has allowed her to expand her business and create a more sustainable operation, with the help of Shopify Capital. “I can spend where I need to grow,” she says.
Removing barriers to growth
Numbers only tell one side of a story when it comes to sales. It’s conversations with business owners like Alison that give the other side.
We hear about the complexities around trying to secure traditional financing, and the restrictions that come with some funding options. Including requirements that take equity from the business to get backing from other lenders.
Translation: When you remove obstacles and restrictions around funding and make it accessible to all, you get the right conditions for success.
Alison says it better than we could. “A lot of people don’t like the idea of borrowing money,” she says. “It can be nerve racking. But I feel like, overall, it’s been incredibly beneficial. Through Shopify Capital, I ended up growing even more than I ever expected. I doubled my revenue.”
Shopify Capital funding was also helpful to many merchants during the uncertainty of the COVID-19 pandemic.
Alison, for example, used some of her funding to cover advertising costs at the beginning of the pandemic. When the world moved online, Prelude & Dawn, which was primarily a bricks-and-mortar operation, was able to pivot quickly to an omnichannel model. Alison continued to grow her presence on social media platforms like Facebook and Instagram with the funding.
It was a move that paid dividends, as it brought in new web traffic for Prelude & Dawn’s online store.
But Alison didn’t stop there. “The next thing I know, I spent some money on influencers and Instagram,” she says. “This move helped me get through the pandemic. In fact, it helped me grow—despite COVID.”
Funding that works for business owners
There’s no hidden secret we uncovered during our research. Instead, the data and conversations with business owners show what’s important: When you make funding accessible, reduce the paperwork, and let entrepreneurs spend their capital however they need to grow their business—that can lead to success, growth, and long-term sustainability.
1The statistic is based on the geometric average of merchants’ six months’ cumulative GMV after taking the first round of Shopify Capital. Propensity score matching was used for pairing of the groups. The study makes further assumptions including equality of access to external funding and similar market trends in the US and Canada. Results may vary for every merchant.