Shopify Capital Originated $141M Of Loans And MCAs In Q3, Says It’s a Meaningful Part Of The Shopify Business

Shopify Capital, Shopify’s small business funding division, originated $141 million in loans and merchant cash advances last quarter, an 85% increase over Q3 last year.

The company has now cumulatively originated $768.9M since it began funding in April 2016.

On the earnings call, Shopify COO Harley Finkelstein commented on the company’s recent initiative to fund non-Shopify payment merchants by saying that “while it’s still early, we’re seeing strong adoption from those merchants.”

“We started Shopify Capital to help solve another playing field for entrepreneurs, access to capital to grow their businesses,” he explained. “This is especially true as merchants gear up for their busiest selling season of the year.”

When asked about how funding would play a role in the company’s long term expansion and retention plans, Finkelstein said the following:

[P]art of this is making sure that we have merchants in the entirety of their journey to success, certainly things like having additional cash for things like inventory and marketing are very important to them. And there’s not too many place to get that with capital. So we think we’re helping merchants by doing this. It also serves of course as a way to retain merchants because we’re not only now their e-commerce platform or the point sale provider or the payments provider, we’re also now in some cases playing the role of their capital provider.

So this is a meaningful part of our business, and it keeps growing, and it’s certainly something we’re very proud of. And in terms of managing the risk, it’s something we keep a close eye on. We do a ton of trade forecasting and ensuring that we look at the data to update our models as we see trends changing. That being said, it’s important to remember that most of the capital that we put out there is insured by our partner EDC.

So we think that we continue to grow the capital business at the same time manage the risk and so we’re not doing anything that is outside of that loss ratio and risk exposure comfort zone that we think we have right now.

Shopify CEO Tobi Lutke later added how their Capital division adds to their Gross Merchandise Value (GMV) because merchants use funds to build their businesses.”What happens is a lot more businesses, that otherwise would not have access to loans get them and therefore actually continue building their business.”