Stripe Capital Review: Flexible Advances for Small Businesses

Stripe Capital Review: Flexible Advances for Small Businesses

Stripe Capital is an extension of the Stripe payment processing platform, offering revenue-based funding to small businesses. It provides cash advances in exchange for a percentage of future sales, giving businesses access to funds without the need for traditional loans. Here’s a detailed breakdown of how Stripe Capital works, its pros and cons, and whether it’s a good funding option for your business.

What is Stripe Capital?

Stripe Capital provides businesses with cash advances based on their historical revenue processed through Stripe. This funding model is ideal for businesses that need quick access to working capital without the burden of fixed monthly payments or lengthy loan applications.

• Advance Amount: Typically 10%–15% of your annual gross revenue processed through Stripe.
• Repayment: A percentage of each transaction is deducted until the total amount (advance + flat fee) is repaid.
• Flat Fee: Instead of traditional interest, Stripe Capital charges a one-time flat fee, ensuring predictable costs.

How to Qualify

To qualify for Stripe Capital, your business must meet the following criteria:

1. Processing History: A minimum of three months of payment processing history with Stripe.
2. Revenue Threshold: Your business must process at least $5,000 annually, with an average monthly revenue of $1,000 over the last three months.
3. Account Standing: Your Stripe account must be in good standing. If previously rejected for a Capital offer, you can reapply after 30 days.
4. Business Location: Stripe Capital is currently available only to businesses based in the United States.

How Stripe Capital Works

1. Receiving an Offer:

   • Stripe analyzes your payment processing history to calculate the advance amount and flat fee.
   • Offers are typically for 10%–15% of your annual revenue.

2. Flat Fee:

   • Stripe charges a flat fee, ranging from 10%–19% of the advance amount.
   • For example:
     • Advance: $1,000
     • Flat Fee: 19% ($190)
     • Total Repayment: $1,190

3. Repayment:

   • Repayment is deducted as a percentage of your daily sales (e.g., 19% of each transaction).
   • Payments are dynamic: the more revenue you generate, the faster you repay the advance.
   • Minimum Monthly Payment: If sales fall short, Stripe charges your bank account to ensure you meet the minimum repayment threshold.

Example of How It Works

Advance Details:

• Advance Amount: $1,000
• Flat Fee: 19% ($190)
• Total Repayment: $1,190
• Repayment Rate: 19% of daily sales.

Repayment Scenario:

• Daily Revenue: $200
• Repayment Deduction: $200 × 19% = $38
• Remaining Balance: $1,190 - $38 = $1,152

If your revenue increases, repayment accelerates. Conversely, if revenue slows, repayment aligns with sales, though the minimum monthly payment ensures progress.

Stripe Capital: Pros & Cons

Pros

1. Easy Qualification: Eligibility is based on consistent revenue through Stripe, with no credit checks or complex applications.
2. Flat Fee: Predictable costs, as there’s no compounding interest.
3. Flexible Payments: Payments are a percentage of sales, adjusting to your revenue flow.
4. No Credit Impact: Stripe Capital doesn’t affect your credit score or debt-to-income ratio.
5. Quick Access to Funds: Funds are often available within 1–2 business days.

Cons

1. Pre-existing Revenue Required: Businesses without established sales can’t qualify.
2. Limited Funding Amounts: Advances are capped at 10%–15% of your annual revenue, which may be insufficient for larger needs.
3. Minimum Monthly Payments: If sales slow, Stripe will charge your bank account to meet the minimum payment.

Is Stripe Capital Right for You?

Stripe Capital is an excellent option for businesses that:

• Have steady revenue but need a quick infusion of cash.
• Want flexible payments that scale with sales.
• Prefer predictable costs without the complexity of interest rates.

However, it may not be suitable if:

• You need funding beyond 10%–15% of your annual revenue.
• Your business is just starting out or lacks sufficient processing history with Stripe.

Conclusion

Stripe Capital is a flexible and transparent funding solution for businesses that process payments through Stripe. Its flat-fee structure and revenue-based repayments make it ideal for businesses seeking short-term capital without the constraints of traditional loans or advances. However, its reliance on pre-existing revenue and capped funding amounts may limit its utility for larger or newer businesses.

If you’re a business owner using Stripe, Stripe Capital offers a seamless way to access funding and keep your business moving forward. Always evaluate your revenue trends and funding needs before accepting an offer to ensure it aligns with your financial goals.