Shopify: “Capital was a larger driver this quarter”

Shopify Capital originated $1.4B in small business loans and merchant cash advances in Q2.

“Capital was a larger driver this quarter, while loss rates in payments and credit are both at normalized levels,” said Shopify CFO Jeff Hoffmeister during the Q2 earnings call.

Beginning in April of this year, Shopify replaced its MCA product in Canada with a loan product in response to new regulations from 2025. It did not elaborate in the Q2 earnings on what specific regulations those were but it is possible they are referring to the amended national interest rate caps that went into effect on January 1, 2025. In a loan, an annualized percentage cost is determinable and controllable from the time the contract is made, whereas there is no predetermined controllable annualized rate on an MCA. Shopify disclosed that the main impact from switching from MCAs to loans in Canada was how it booked them in their financial statements.