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If you use Stripe to process payments for your business, Stripe Capital is a loan program worth considering. It offers qualifying Stripe customers fast and convenient loans that can be used to improve their cash flow and invest in growth. But what’s the catch, or is there one? Here’s what you need to know.
Read on to learn about:
- How Stripe Capital works
- The eligibility requirements
- The application process (or lack thereof)
- Pricing
- Repayments
- Pros and cons
- Answers to frequently asked questions
- Our verdict
Stripe Capital Overview
Stripe Capital is a business loan program that was launched by the payment service provider, Stripe, in 2019. It’s designed exclusively for Stripe users, and eligibility is based on your activity with the payment processor — not your income or credit scores.
Upon approval, you can quickly gain access to your loan funds as soon as the next business day. You’ll pay a single flat fee for the loan, and then will repay the total amount through automatic deductions from your daily sales with Stripe, similar to a merchant cash advance.
Business owners can use the funds for a variety of purposes, from working capital and purchasing inventory to funding new marketing initiatives. Stripe doesn’t mention restrictions on how the funds must be used on their website.
Stripe Capital Eligibility Requirements
Can you get a loan from Stripe Capital? Eligibility depends on a few different factors. You must:
- Have a US-based business
- Have at least six months of processing history with Stripe
- Have a processing volume of over $5,000 per year
- Not have been denied a Stripe Capital loan in the past 30 days
Stripe automatically checks user accounts to determine if they’re eligible for a Stripe Capital loan. if your account becomes eligible, you’ll receive an email and will be able to view the loan offer within your Stripe Capital dashboard (under the Capital tab). Once approved, the offer will be available in your dashboard for 30 days. After that point, your eligibility will be reassessed.
Stripe Capital Application Process
Unlike many other types of loans, you can’t apply for a Stripe Capital loan. Instead, you have to wait to receive an offer. This can be frustrating if you seem to meet all the eligibility requirements but still don’t have an offer. However, the company has shared a few additional factors that can increase your odds of getting prequalified, which include:
- Growing your sales/processing amounts
- Processing transactions consistently without periods of inactivity
- Having a variety of customers
- Having a low dispute rate
- Connecting your bank account
- Having a high sales volume
The above can not only help you get approved, but can help you qualify for larger loan amounts.
Stripe Capital Pricing
Stripe Capital charges a single flat fee for each of its loans. For example, on its website, the company gives an example of a $15,000 loan that comes with a $1,500 fee which is added to the loan balance. You won’t have to worry about compounding interest or any hidden fees.
Once you receive a notification that you’re prequalified, you’ll typically be presented with a few loan amounts that you can choose from. Along with the varying loan amounts, you’ll see the corresponding loan fees. Higher loans generally come with higher fees.
Stripe Capital Repayments
Stripe Capital repayments are automatically deducted from your daily Stripe sales until the full amount owed (the loan amount plus the flat fee) is repaid in full. The amount deducted from each sale will be determined by the fixed percentage that’s assigned when you choose how much you’ll borrow. Generally, the more you borrow, the higher the fixed repayment percentage. For example, Stripe gives the following example repayment rates:
| Loan Amount | Repayment Rate |
| $15,000 | 9% |
| $20,000 | 12% |
| $25,000 | 15% |
While repayments are processed automatically as you receive payments through your Stripe account, you can always opt to pay off the amount you owe early or make additional payments without any prepayment fees.
Further, in addition to the fixed repayment rate, you will also need to repay certain minimum amounts by certain dates. For example, it could be a minimum of $2,000 that’s due every 60 days. If you haven’t repaid the minimum amount by the end of a payment period, Stripe will automatically deduct the remaining amount from your bank account to meet the minimum payment requirement.
Stripe sets these minimums to ensure that all loans are paid off within 18 months. You can find your minimum requirements and payment period deadlines outlined in your loan contract.
Stripe Capital Pros and Cons
Now that you know the basics of how Stripe Capital loans works, here are the main pros and cons to consider.
Pros
- Build business credit: Stripe Capital reports loan performance to the Small Business Financial Exchange which can help you gain access to business credit with other lenders.
- No personal credit check: Eligibility relies on your history with Stripe and won’t require a personal credit check or a personal guarantee.
- Convenient repayments: You don’t have to worry about making repayments, they are automatically deducted from your daily Stripe sales.
- Automatic prequalification: No need to apply, you will be notified when you qualify.
- Fixed repayment percentage: You’ll know what to expect with a fixed repayment percentage taken from your daily sales.
- One fixed fee: The cost of the loan is easy to understand as it’s one fixed fee added to your loan amount.
- Repeat funding: Stripe Capital may lend you more money once at least 75% of your loan is paid off.
Cons
- Have to wait for an offer: If you don’t qualify for a Stripe Capital loan, you simply have to wait until you are offered a loan.
- Minimum repayment milestones: If your sales dip, you will still be required to meet minimum repayment milestones which can result in catchup deductions from your bank account.
- Stripe users only: Stripe Capital is only available to Stripe users.
- Reduce cash flow: The repayments can cause cash flow problems if you overcommit to a repayment rate that’s too high.
Stripe Capital Frequently Asked Questions
Still have questions? Here are answers to some frequently asked questions about Stripe Capital.
Is Stripe Capital a lender?
No. Stripe has partnered with Celtic Bank which issues all of the loans that are offered through the Stripe Capital program.
Are Stripe Capital loans unsecured?
Most loans through Stripe Capital are unsecured so no collateral is required from the borrowers. However, Stripe may file a UCC-1 statement to take a security interest in a business’s assets if loans become delinquent or if they are in amounts above $150,000.
Can you get more funds once you pay off a Stripe Capital loan?
Once you’ve paid off 75% of a Stripe Capital loan, your account will be evaluated to see if you qualify for additional funds. However, additional funds are not guaranteed.
Can I offer Stripe Capital to my customers?
Stripe Capital does offer platforms an end-to-end lending API that enables them to extend financing to their customers.
Stripe Capital: The Verdict
Overall, Stripe Capital offers business owners a very convenient financing program that can help them to improve cash flow and grow. The cost and repayment structure seem to be in line with other similar products from PayPal, Shopify, and Square. Plus, it can help you to establish business credit.
One of the biggest drawbacks is that you can’t take proactive steps to apply. You will just have to wait until you receive notification that you’re pre-qualified. However, Stripe has disclosed many of the key things they look for from Stripe users which can help you move things along.
Once you get the coveted loan offer, it’ll be up to you to review the loan amounts, costs, and repayment percentages to see if they make sense for your business needs and budget. If borrowing the money will enable you to invest in business growth that surpasses the loan’s cost, it can be a smart move. Only you will be able to run the numbers and make the final call.
However, overall, the Stripe Capital offering presents startups and businesses with convenient and competitive financing that doesn’t rely on a personal guarantee — something required by most business lenders and credit card companies today. It can be a handy financing tool but will only be available when Stripe decides you’re eligible.
