Working Capital
Editorial Team
At Working Capital, we believe access to funding should be simple, transparent, and designed around your business not the other way around. We’re committed to helping entrepreneurs make smart financial decisions with tools, guidance, and lending partners they can trust.
Many business owners start their financing search by comparing rates, fees, and funding amounts. But for small businesses, the more important question is often whether a lender understands how the business actually generates revenue. A software startup collecting monthly subscription payments operates very differently from an online retailer processing hundreds of product orders per day, even if both companies produce similar top-line revenue.
Arc and Shopify Capital are both data-driven working capital providers that move beyond traditional bank underwriting. Neither relies heavily on personal credit scores, collateral, or lengthy application processes. Instead, both use performance data pulled directly from the business itself to evaluate eligibility and determine funding offers. That shared approach can make the two programs appear surprisingly similar at first glance.
The similarities, however, end once underwriting begins. Arc evaluates companies through the lens of recurring revenue, growth, and financial performance, while Shopify Capital focuses on the sales activity occurring within a merchant’s Shopify ecosystem. As a result, the same business that qualifies easily for small business loans through one program may be completely ineligible for the other.
Those differences are important considerations when comparing funding amounts, repayment structures, qualification requirements, and the types of businesses each platform is designed to support.
Arc’s Working Capital financing was originally built to serve SaaS and subscription-based companies with predictable recurring revenue, though the platform has expanded beyond strictly subscription businesses. Companies with recurring revenue streams remain a natural fit because Arc places significant emphasis on revenue consistency, growth trends, and overall business performance during underwriting. However, Arc notes that current customers include companies in the SaaS, legal, education, advertising, and retail sectors.3
Financing amounts are often tied to recurring revenue, with first-time borrowers eligible for roughly 20%–50% of annual recurring revenue (ARR). Existing customers with strong repayment histories may qualify for substantially larger facilities (up to 70%). Available small business loans offer capital amounts from $25,000 to $5 million dollars, depending on the company’s revenue, growth trajectory, and financial health.2
Arc’s underwriting remains heavily focused on business performance rather than personal credit. The company looks for at least $250,000 in annual revenue, predictable income, six months or more of financial runway, and incorporation in the U.S. Personal guarantees and collateral requirements are generally not necessary. Arc integrates directly with a company’s banking and operating systems to evaluate financial performance. review revenue patterns, growth metrics, and cash position.3
Financing costs vary. Unlike many revenue-based financing products that rely on a fixed fee structure, Arc’s current Working Capital offering generally uses pricing tied to prevailing interest rates and borrower risk. Often owners can expect an interest rate around prime plus 1-2%.3 Businesses should review their specific financing agreement to understand the total cost of capital associated with their offer.
For companies with predictable, recurring revenue, Arc’s model is designed to align financing with business performance and cash flow.
Shopify Capital loans are pre-approved, invitation-only funding products. Its underwriting is entirely store-performance-driven. Shopify uses its algorithm to evaluate each merchant, including transaction volume, sales trends, average order values, customer return rates, and growth trajectory; all drawn from the merchant’s existing Shopify store data. Shopify looks for merchants with at least three months on the platform that operate in the U.S., Canada, the U.K., Australia, the Netherlands, or Germany. No business on or off the platform can request funding or fill out an application.9
Because Shopify has deep visibility into every transaction a merchant processes, its underwriting is highly automated and frictionless. No personal guarantee, credit check, or collateral is required for most loans, though Shopify may file a lien on business assets in some circumstances.8 For approved borrowers, funds are typically deposited within two to five business days after acceptance.6
Short-term loans for businesses can be small, offering only a few hundred dollars.7 However, high-revenue merchants may be eligible for amounts up to $2 million.6 Shopify Capital does not publish an explicit formula for how offer amounts are calculated, and most merchants receive offers considerably below the ceiling based on their individual store data.
Shopify offers merchants a choice between two fee options, and the distinction matters significantly for businesses that can repay quickly. Under the fixed factor-rate model, a factor such as 1.1 or 1.2 sets the total repayment amount upfront. Early payoff in this case does not reduce the fees owed.8
Under the monthly-fee structure, Shopify charges a fee each calendar month while any balance remains outstanding. Satisfying the loan ahead of the 12-18-month maximum term eliminates additional monthly fee charges and directly the cost of funding.8 It gives merchants who can repay early a meaningful cost advantage compared to Shopify’s own fixed factor-rate option.
Repayment is automated as a fixed percentage of daily Shopify sales, with no payment taken on zero-sales days. However, borrowers must meet minimum repayment milestones in each of the first two six-month periods.8 The daily deduction cadence means repayment tracks sales performance in near real-time. High-volume days produce larger deductions, slow days produce smaller ones, and zero-revenue days produce nothing.
The Arc Card is not a credit facility. Rather it is a debit card available to Arc business account holders. Its available spending limit adjusts with the company’s account balance and available revenue. However, like other business credit cards, the Arc Card does offer cashback on purchases. The card includes spending controls for team members and live expense monitoring capabilities.4
As a debit card, there is no option to carry a balance or draw on credit to cover expenses. Businesses can only use the card to spend funds available in the Arc account. The card is designed for startup finance workflows, with multi-user controls and granular spending visibility built for teams.
Shopify merchants may also qualify for Shopify Credit, a Visa business card also offered by invitation. This pay-in-full business credit card for small businesses comes with cashback benefits. Business owners can choose one spending category in which they will earn up to 3% cashback. All other purchases earn 1%. The card does not charge an annual fee.10
As a pay-in-full charge card, Shopify expects cardholders to repay the full balance monthly, though a balance-carry option of up to 10 months is available with a fee. The card has one critical restriction. Merchants cannot qualify for Shopify Credit as long as they have an active Shopify Capital loan.10 Business owners will need to decide which type of funding best suits their needs and potentially reach outside the Shopify platform for additional capital.
Arc offers an integrated business banking platform that combines cash management, financing, and corporate spending tools within a single dashboard. Through this system, businesses can access operating accounts for day-to-day financial activity and issue both physical and virtual corporate debit cards. It also includes spending controls and permissions that help companies manage how money moves across teams.1 By placing these financial tools in a single system, Arc aims to reduce the need for multiple disconnected financial products.
Separately, Arc also offers treasury infrastructure that allows businesses to earn yield on idle cash.5 For startups holding substantial reserves between funding rounds or maintaining extended runways, this provides an opportunity to generate returns on funds that would otherwise sit in a traditional operating account.
Shopify Capital is built directly into the Shopify admin, allowing merchants to view funding offers, accept financing, and track repayment activity from the same dashboard they use to manage their online stores. Beyond financing, Shopify offers additional financial products such as Shopify Balance,11 a business financial account, and Shopify Credit, creating a broader commerce-focused financial ecosystem than many standalone lenders.9
While these products can be managed within Shopify’s platform, they remain separate offerings, and merchants do not need a Shopify Balance account to qualify for or use Shopify Capital funding.
Arc and Shopify Capital demonstrate that modern business financing is increasingly built around data rather than traditional lending metrics. Both platforms use automated underwriting, offer relatively fast funding decisions, and structure repayment without many of the requirements associated with conventional bank loans. Yet despite those similarities, they evaluate businesses through entirely different lenses.
The deciding factor for most companies should not be the fee structure, repayment term, or maximum funding amount. It should be how the business generates revenue and how well the financing aligns. Arc is designed around recurring revenue and the financial characteristics of high-growth startups, while Shopify Capital is built specifically for merchants whose sales activity occurs within the Shopify ecosystem. Each platform uses the data it can see best to assess risk and determine funding offers.
For businesses that qualify for only one program, the choice is often made automatically by the underlying business model. For the smaller group that may have access to both, the comparison becomes more nuanced. Factors such as funding needs, repayment preferences, revenue predictability, and future growth plans may all influence which structure is the better fit.
Ultimately, the most relevant online working capital provider is often the one that offers financing that fits your business. How a financing provider evaluates your business and what type of company it was designed to serve can be just as important as comparing costs or funding amounts. The clearer that alignment is, the easier it becomes to identify the financing solution that best supports your next stage of growth.
1https://joinarc.com
2https://www.joinarc.com/guides/revenue-based-financing
3https://www.joinarc.com/working-capital
4https://www.joinarc.com/business-account
5https://www.joinarc.com/treasury-management
6https://www.shopify.com/capital
7https://www.shopify.com/news/capital
8https://help.shopify.com/en/manual/finance/shopify-capital/united-states
9https://help.shopify.com/en/manual/finance/shopify-capital/eligibility#shopify-capital-eligibility-requirements
10https://www.shopify.com/credit
11https://www.shopify.com/balance
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