The Offer in Your Dashboard

A client called me in January after taking a Shopify Capital advance. Not to tell me about it. To ask what the "factor rate" meant on the agreement he'd already signed.

The advance was $85,000. The factor rate was 1.14. He owed back $96,900, repaid automatically as a percentage of daily sales. He'd seen the offer in his Shopify admin, clicked through, and had the money in 48 hours. No math run before accepting.

What these products are designed to do

Shopify's gross loans receivable hit $1.6 billion at the end of 2025, up 43% year-over-year. Block and Square had $708.5 million in commercial loans held for sale over the same period. These platforms are among the largest SMB lenders in the country, and they got there by making the offer appear inside your existing workflow, pre-approved, one click from funded.

That's deliberate. Frictionless access is the product. Underwriting happens in the background, using your transaction history. The offer shows up when your cash is tight, because the platform knows that too.

These advances don't carry an APR the way a bank loan does. Factor rates don't annualize, which makes comparison shopping harder than it should be. An $85,000 advance at a 1.14 factor costs $11,900. That's not inherently bad. It depends entirely on what you're funding and how fast you'll repay.

How to actually evaluate it

You need three numbers.

First, total cost of capital: factor rate times advance amount, minus the advance. $96,900 minus $85,000 is $11,900.

Second, effective APR: divide that cost by the advance amount, then annualize based on actual repayment time. Pay it back in four months and you're at roughly 40% APR. Eight months, closer to 20%. Your repayment pace is a function of sales volume. Model it yourself before the platform does it for you.

Third, what you're actually buying. Working capital advances make sense when the deployment has a clear return faster than the cost. Inventory you'll turn in 60 days at a margin that covers the fee? That math often works. Covering payroll during a slow quarter? You're paying 40% APR to delay a problem, not solve it.

The reflex problem

Nearly half of small businesses rely on day-to-day sales or existing bank balances to operate. Almost a third use personal credit cards when other financing isn't available. Against that backdrop, a pre-approved offer with no application and 48-hour funding is genuinely useful, and the platforms know it.

Most of these products aren't predatory. The problem is that convenience removes the decision.

My client didn't think of it as taking on debt. He thought of it as clicking "use available balance." That framing is part of the product design.

Working capital is a tool. Every source of it has a cost and a set of conditions under which it makes sense. The only way to use it well is to evaluate it before you need it, not after you've already taken it.

A useful exercise: pull whatever working capital offers are currently live in your business banking, payments, or commerce platforms. Calculate the effective APR for each. Compare it to what a business line of credit would cost from a bank or CDFI. That comparison, done once when you're not under pressure, changes how you respond the next time an offer shows up.

Most founders I work with have never done it. They've either taken the platform offer reflexively or avoided it without understanding when it would actually be the right call. Both choices are expensive.