For many ecommerce businesses, Black Friday and Cyber Monday (BFCM) are the most important shopping days of the year. BFCM are the highest revenue days of the year and businesses often plan product and marketing strategies many months in advance of this busy shopping weekend. Ecommerce businesses rely on working capital to support this investment in inventory and marketing, knowing they will not see a return until the shopping weekend hits. Numerous capital providers provide such working capital to ecommerce businesses. When evaluating which capital partners can provide the most effective financing solution for your ecommerce brand this BFCM, consider the key features of available funding.

The Challenges with Merchant Cash Advances (MCAs) and Merchant Loans on Black Friday and Cyber Monday

In 2023, Shopify merchants broke Black Friday and Cyber Monday records, generating $9.3 billion in sales. Shopify merchants in the United States may turn to Shopify Capital to fund their upcoming investments. Relying on Shopify Capital to fund inventory orders or the execution of marketing strategies can significantly impact how much cash founders are left with after a successful holiday season. That’s because Shopify Capital’s funding model takes a fixed percentage of daily sales as payment – without a maximum cap!

This type of capital product can result in accelerated payback during periods of high revenue, like BFCM. When founders and businesses are expecting to pocket extra profits, they can instead find their profits being used to pay off their working capital providers. In short, in the months they generate their highest revenues, a lot of that revenue is leaving their company to pay Shopify advances.

Clearco used to offer a similar product to Shopify Capital. However, we determined that the daily cadence of payments and unpredictability of how much we would debit customers daily was burdensome for founders. It meant our founders could not plan future capital needs easily or accurately. We knew there had to be a better way to provide working capital without this daily uncapped obligation.

Meet Invoice Funding: Clearco’s Answer to the Traditional MCA and Merchant Loans

When we launched our Invoice Funding product, we decided to end daily payments, switching to a weekly debit or payment cadence. Additionally, we switched to a “fixed” weekly payment model. With Invoice Funding, our founders know exactly how much Clearco we will be taking every week which generates lots of benefits:

1. Founders can plan their upcoming capital needs more accurately because they know exactly how much they’re paying Clearco every week and for how long (based on whether the founder selected a 4-, 5- or 6-month estimated term).
2. During periods when revenues are growing rapidly, such as BFCM, Clearco’s payments remain the same – they don’t increase above the “fixed” amount!some text
   1. Unlike Shopify, if a business doubles their revenue during BFCM weeks, we do not double the amount we collect compared to prior week.
3. We understand that capital planning and revenue volatility are common challenges for ecommerce businesses. If a business is having a slow week, we may actually take less than our “fixed” payment, because our product is designed to never debit more than 30% of a customer’s revenue to pay an advance. The estimated term of the advance will simply be extended to reflect the fact that payments were lower for the slow week. 
4. In summary, when revenues are growing rapidly during BFCM, we never take more than the “fixed” payment.  And if revenues drop unexpectedly, our “fixed” payment shrinks so we never take more than 30% of your revenues.   

The Difference Between Shopify Capital and Clearco Invoice Funding

Below is an illustrative example of an ecommerce business (let’s call it “ACME Apparel”) who sells apparel and sees their revenues peak in November and December:

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If ACME Apparel were to work with Shopify Capital and take a $2M advance with an 8% fee and daily payments equal to 15% of revenues, their balance would be paid down as follows (see the purple line):

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As ACME Apparel’s revenues peak during BFCM, they end up paying 25% of the outstanding amount in a single week, and the effective payment period of the MCA is only 3.5 months! That’s good for Shopify’s profits and returns on their capital because they are getting paid back faster. The impact on the customer? That’s less great. Because Shopify Capital’s product structure allows it to participate in the upside of its customers’ revenues, more revenue dollars leave ACME Apparel in their busiest season - while still restricting them because it is a loan.

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Compare the above scenario to a 6-month advance that ACME Apparel takes from Clearco at the same fee (shown in the dark purple line):

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Clearco’s funding lets ecommerce businesses reap the rewards of a successful BFCM by never taking more than the “fixed” weekly payment described in our contract. What does that mean for the customer? She can better plan and budget. She can reinvest excess profits into her business during a period of rapid growth instead of paying part of her excess revenues to her MCA provider. 

Clearco is Making Capital Planning Easier Without Losing Flexibility 

Clearco’s sole mission is to provide founder-friendly working capital for sustainable growth to ecommerce businesses. We have stayed true to that “North Star” by adapting our funding solution to better fit the needs of our customers. If you’re interested in learning more about Clearco’s funding, click here to get started!