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 regarding applying for 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 be the most accessible and affordable option at your disposal.
Stripe Capital offers a single product only for businesses using 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 fixed 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 should not exceed eighteen months.
Eligibility for Stripe Capital is almost entirely based on your Stripe sales volume and how long you’ve used Stripe. 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.
You’ll have to contact Stripe to learn exactly how much sales your specific business must process 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 fixed 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 requirement. 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 loan early with no extra cost. However, you must contact Stripe Capital to arrange early repayment.
Stripe is not a direct lender. Their banking partner, Celtic Bank, provides the funding.
You can have funds in your Stripe account within one business day. Here’s how to get started:
You can’t apply directly for a Stripe Capital loan. 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 and 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 lists the borrowing amount, repayment rate, and fixed fee.
By contacting Stripe Capital, you can ask for an amount that differs from your three offers if it doesn’t exceed your largest offer. Stripe will adjust your repayment rate and fixed fee based on your new borrowing amount.
Once you accept your offer, you will be asked to sign a loan contract containing your minimum payment. Funds will 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 and 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. Repayment terms cannot exceed 18 months, so you must meet certain milestones to stay on track.
Once you pay off your loan in full, you will automatically be evaluated for a new offer. Paying early does not necessarily mean receiving a new offer immediately afterward or even qualifying for one.
In some cases, borrowers become eligible for additional financing once they pay off 75% of the loan. Again, there’s no way to apply for more funds directly – you must wait for Stripe to send the offer.
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.
The Stripe Capital program 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 worry about gathering paperwork or filling out information about your business.
Also, Stripe Capital does not charge prepayment penalties, and the Flat 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.
The most significant disadvantage of Stripe Capital is the lack of clarity regarding requirements. Stripe users have no way of knowing if they’ve made enough sales to become eligible until they receive the email 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 its 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, and 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.
Pros:
Cons:
Most online reviews are about Stripe payments, with very few about Stripe Capital specifically. We should note that many of the reviews on Stripe payments were negative, as the company has a 1.1 out of 5 review rating on Better Business Bureau (BBB) and a 3.3 out of 5 rating on TrustPilot.
BBB accredits Stripe with an A+ rating, and the company actively responds to complaints. Of the few Stripe Capital reviews available, customers liked the simplicity of getting approved and the fast funding time.
Negative reviews discussed high costs and the inability to apply directly for a loan. Other negative reviews addressed a lack of transparency and difficulty connecting to customer service.
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 find 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.
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 qualify. Does your business experience occasional dips in revenue? This might suggest that you won’t be able to meet your minimum payment.
Fortunately, there are many equally accessible business lenders. Many other business lenders have loose requirements and can put money in your bank account in under 48 hours.
Some 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. With no set due date, you can take as long as you want to pay off the debt.
Other small business loan programs available include:
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, you need consistent sales to get the borrowing amount, rates, and terms you’re looking for.
For these reasons, we at UCS give 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.
Disclaimer: The Stripe Capital trademark is owned by Stripe, Inc. and its use herein is for reference purposes only and it does not indicate sponsorship or endorsement from Stripe, Inc.
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