Jan 07, 2021 - 09:55 AM
There are two main reasons why a seller may choose Payability over a Shopify Capital Product:
1. Early Payment Benefit - Unlike the Spotify Capital product, Payability will allow a seller to return their funds early with a rebate for the remaining cost. This can be extremely useful to cover a short term cash flow gap without the penalty of full cost.
2. Ability to connect multiple marketplaces/platforms - Payability offers its customers the choice to connect all of their applicable marketplaces and platforms. Omni channel sellers will be able to maximize their approval amount instead of being boxed into performance on one platform.
As well, it’s important to remember that Payability can be a complementary product to Shopify Capital and vise versa. If a seller needs to obtain more funds, it is very common to have both solutions.
Here’s a link for an nChannel article that goes more in depth on a comparison: https://www.nchannel.com/blog/shopify-capital-and-alternatives/
Effective Interest Rate?
Our understanding of their business is that they have two products
Instant Advance: This is for sellers who mostly sell on marketplaces that pay on a net 14 to net 17 basis and want to get their cash instantly i.e. daily. Payability offers anywhere to 0.5% to 2% on the amount advanced. So if you sell $2,000 worth of goods daily, at the most you would pay them $40 per day to get your cash immediately. The longer you’ve been a seller (the less riskier you are to them), the lower your rate will be.
Longer Term Loan: This is an advance on future revenues and at the high end, the rate is also 2% for the term of the advance, usually weekly to 5 months at most.. As noted before, if you are able to pay back early, the fees for that period are waived.
What if you are unable to pay on time? Is there a penalty?
We asked their team this question and here is what they said: Technically, what we do is not “loans” in the traditional sense but advances on future revenue. If your business falls on hard times, we reduce the amount you pay per period or even a reprieve until you are able to pay back the full amount. We will try and work with you to make it work and rarely go down the collections route.