Stripe Capital is the business lending division of the online payment processor Stripe. Like their POS service, Stripe Capital’s primary goal is simplicity, particularly when it pertains to applying and paying back business loans.
However, Stripe Capital is designed for a particular type of business. And compared to traditional business loan options, the criteria Stripe uses to determine borrowing amounts and rates are somewhat challenging to understand. But if you belong to Stripe Capital’s target audience, this may very well be the most accessible and affordable option at your disposal.
Stripe Capital offers a single product that is only available for businesses that use Stripe’s POS service or Stripe Connect, Stripe’s marketplace platform.
The product’s repayment structure is very similar to a merchant cash advance. But instead of making payments as a percentage of all daily debit and credit card sales, this percentage is only deducted from your daily transactions processed through Stripe.
The maximum borrowing amount is unlisted, as is the maximum term length. But according to reports, the average Stripe Capital loan amounts to around $10,000 to $20,000. The repayment structure also suggests that loans are not supposed to exceed eighteen months (we’ll explain why in just a bit).
Eligibility for Stripe Capital is based almost entirely on your Stripe sales volume and how long you’ve been using Stripe. Thus, the only thing you need to apply is an account with Stripe POS or Stripe Connect. No other documentation or information is required.
There are no minimum requirements for credit score or time in business. Stripe Capital does not disclose a minimum requirement for annual sales, but it’s safe to assume that borrowers must have consistent and increasingly strong sales volume. It seems you’ll have to contact Stripe to learn exactly how much sales your specific business must process on a monthly or annual basis to qualify. The lack of precise revenue requirements likely stems from the fact that Stripe customers come in all sizes.
All Stripe Capital loans come with a single, fixed fee. Like a traditional merchant cash advance, this fee is combined with a percentage of your daily sales to determine your payments. Stripe does not disclose the ranges for either percentage. However, all the hypothetical examples on Stripe’s website use a 10% fixed fee. This is roughly the same average fee for a loan from Stripe’s main competitors, PayPal Working Capital and Square.
All Stripe Capital loans must also adhere to the following minimum payment rule. Every borrower is assigned a minimum amount that they’re expected to pay every 60 days. According to Stripe, the purpose of this rule is to prevent the maximum duration of the loan from exceeding 18 months. If the 60-day mark is approaching and you haven’t met your minimum payment, you must pay the remaining amount to fulfill this rule.
You can pay off the full amount at any time and with no extra cost. However, you must contact Stripe Capital if you’re looking to pay off the loan early.
Much like Square Capital, Stripe Capital does not have a conventional application process. You can have funds in your Stripe account as soon as one business day. Here’s how to get started:
You don’t have to apply for Stripe Capital loans. Instead, Stripe will reach out to you if your sales volume denotes that you are eligible for funding. In this case, you will receive an email along with a dashboard notification about your available offers.
Upon logging into the “Capital” tab of your dashboard, you will see three different loan offers. Each offer will contain the borrowing amount, repayment rate, and fixed fee. While you cannot ask for a borrowing amount that exceeds your most significant offer, you can ask for an amount that differs from your three offers. If you wish to do so, contact Stripe Capital. Your repayment rate and fixed fee will be adjusted based on your new borrowing amount.
Once you accept your offer, you will be asked to sign a loan agreement containing your minimum payment. Funds will then appear in your Stripe account in 1-2 business days. If you don’t accept one of your three offers within 30 days, your business will be re-evaluated to determine if you’re eligible for a fourth offer. It’s unclear when this fourth offer will appear, though you will probably receive a notification in your dashboard.
After receiving funding, payments will be deducted when you begin processing sales through Stripe. You can view your payment history along with your minimum payment in your Stripe dashboard. If you have not met your minimum payment within 60 days, Stripe will automatically deduct the remainder from your Stripe account or business bank account.
Once you pay off your loan in full, you will automatically be evaluated for a new offer. Paying early does not necessarily mean you will receive a new offer immediately afterward or even qualify for one.
If you have successfully met your minimum payment and made consistent sales, you may be able to access additional funds while paying off your existing loan. In this case, you’ll receive an email and dashboard notification about the additional funds.
It’s important to note that these additional funds are not a second, separate loan. You can’t become eligible for more funding until you’ve paid off your existing balance in full.
If you’ve paid off your existing balance in full and haven’t received another offer, contact Stripe. You may be able to receive an offer sooner than you would have if you didn’t ask.
Stripe Capital may be your most convenient and accessible funding source if you use Stripe to process payments. Your credit score has zero impact on your borrowing amount or fees. Since there’s no application process, you don’t have to go through the trouble of gathering paperwork or even filling out information about your business.
Also, Stripe Capital does not charge prepayment penalties, and the fixed fee is not charged up-front. This means that you could save on interest payments by paying early. Some other business lenders don’t charge prepayment penalties, but they might front-load your interest. Thus, paying early wouldn’t save you any money.
Arguably the most significant disadvantage of Stripe Capital is the lack of clarity when it comes to requirements. Stripe users have no way of knowing if they’ve made enough sales to become eligible until they receive the email mentioned above or dashboard notification.
Then again, this could also be viewed as an advantage. Rather than meeting general standards for revenue, eligibility depends on individual performance. For this reason, a smaller business could theoretically become eligible for funding solely because their revenue has grown substantially, even if they haven’t reached a specific threshold.
Another disadvantage is the deceptive repayment structure. With a traditional merchant cash advance, payments fluctuate with your sales. You don’t have to worry about making large payments when business is slow. But with Stripe Capital, all borrowers must make minimum payments every 60 days, regardless of their sales volume. If you’re not on track to fulfill this requirement, you might have to make a large payment even though your sales volume has fallen.
Exceeding your minimum payment within 60 days will not lower your next minimum payment. So, the answer is no.
If you don’t think you’ll be able to make your minimum payment on time, contact Stripe Capital to work out a solution. This may prevent you from having to make a single large payment (i.e., $500+) on the 60-day mark.
Eligibility depends on sales volume and your overall history with Stripe. There are no specific requirements for revenue, but if Stripe Capital is anything like Square Capital, eligible businesses must also have a solid ratio of new and returning customers. This denotes that you’ve grown your customer base and will be able to pay off your debt without damaging cash flow.
If you don’t receive offers from Stripe Capital, it might be because Stripe doesn’t believe you’ve grown your sales volume enough to deserve them. Does your business experience occasional dips in revenue? This might suggest that you won’t be able to meet your minimum payment.
Thankfully, failing to receive offers from Stripe Capital does not mean you won’t qualify for other, equally accessible business lenders. Many other business lenders have very loose requirements and can put money in your bank account in under 48 hours. Some of them offer products similar to a merchant cash advance but without Stripe Capital’s 60-day rule. In other words, you don’t have to pay back a specific amount in a certain time frame. You can take as long as you want to pay off the debt, with no set due date.
Other small business loan programs available include accounts receivable factoring, equipment financing, bad credit business loans, SBA loans, revenue-based business loans, and business lines of credit.
If you use Stripe to process payments, accessing Stripe Capital will require less effort than virtually any other business lender. But if those offers don’t come when you need them, you may still be able to qualify for a myriad of alternatives. For many of these options, consistent sales are all you need to get the borrowing amount, rates, and terms you’re looking for.
For these reasons, we at UCS gives Stripe Capital a 4.5 out of 5 rating and suggest using them if their terms are to your liking and fit your business needs.