Shopify charged off $166 million of merchant loans and cash advances, net of recoveries, in the first nine months of 2026, against $101 million a year earlier, according to the 10-Q it released on 3 November. That is a rise of 64%, by our arithmetic.
Over the same period the interest and fees Shopify earned on those loans rose 46%, to $271 million from $185 million, and it bought $4.3 billion of loans and merchant cash advances from its bank partner, against $2.8 billion. That nine-month total is already above the $4.2 billion its 10-K gives for all of 2025, as rounded in the filings.
Business Pill · Seller Financing
An evergreen Business Engineer explainer on seller financing: when the seller also becomes the lender. It explains the general idea only and does not discuss Shopify.
The key insight: By our arithmetic, Shopify’s net charge-offs on merchant loans and cash advances rose 64% in the first nine months of 2026, to $166 million, while the interest and fees it earned on them rose 46%, to $271 million.
The lending runs through Shopify Capital. The 10-Q describes the mechanics: “Certain loans and merchant cash advances are facilitated by the Company and originated by a bank partner, from whom the Company then purchases the loans and merchant cash advances obtaining all rights, title and interest or discount.”
In the third quarter Shopify bought $1.5 billion of loans and advances, against $1.0 billion, and earned $96 million of interest and fees, against $66 million. It set aside $63 million of provision for credit losses, against $49 million, and charged off $59 million, against $41 million.
Over nine months the provision was $217 million, against $137 million, up 58% by our arithmetic. The filing notes that the interest and fees are not revenue within the scope of ASC 606.
Interest and fees earned, provision for credit losses and amounts charged off net of recoveries on Shopify’s loans and merchant cash advances, nine months to 30 September 2025 and 2026, from Note 6 of the 10-Q. Percentage changes are our arithmetic.Animated: interest and fees earned on Shopify’s loans and merchant cash advances by quarter, first quarter 2025 to third quarter 2026, from Shopify’s 10-K and 10-Qs; the fourth quarter of 2025 is our arithmetic.
The Size of the Book
Gross loans receivable were $2,226 million at 30 September and merchant cash advances $370 million, against $1,621 million and $358 million at the end of 2025. The allowance for credit losses was $246 million, against $195 million, leaving a net book of $2,350 million, against $1,784 million.
By our arithmetic the allowance was 9.5% of the gross book at 30 September, against 9.9% at the end of 2025, while the gross book grew 31%. So the reserve per dollar lent was slightly lower even as charge-offs rose.
Quarterly interest and fees have risen from $57 million in the first quarter of 2025 to $62 million, $66 million, $73 million in the fourth quarter (our arithmetic: $258 million for 2025 less $185 million for nine months), $84 million, $91 million and $96 million.
Lending Losses in the Income Statement
Transaction and loan losses fell to $120 million in the quarter from $148 million. The 10-Q says the fall came from Shopify Payments and was offset by “a $14 million increase in losses related to lending services driven by an expansion of our offerings and programs relative to the same period in 2025.” Over nine months it gives an increase of $83 million in losses related to lending services.
Canada changed the rules on merchant cash advances in 2025, and the 10-Q says Shopify moved its Canadian Shopify Capital product from merchant cash advances to loans from April 2026. Since then the cash flows from merchant cash advances are shown in investing activities, as loans already were.
What the Risk Factors Say
Shopify’s 10-Q says: “There have been no material changes to the Company’s risk factors from those disclosed in the 2025 Form 10-K.” It adds no new risk factor this quarter.
Connecting the Coverage
Our related pieces on Shopify and commerce payments:
As we read Note 6, Shopify Capital has grown faster as a buyer of loans than as an earner on them: purchases rose to $4.3 billion from $2.8 billion over nine months, while interest and fees rose 46%.
As we read the allowance table, the reserve set aside per dollar of loans was slightly lower at 30 September than at the end of 2025, 9.5% against 9.9% by our arithmetic, while charge-offs rose.
As we read the income statement, lending losses have become the part of transaction and loan losses that is rising: the 10-Q gives an $83 million increase from lending services over nine months, while losses related to Shopify Payments fell.
Shopify 10-Q, third quarter 2026
“Certain loans and merchant cash advances are facilitated by the Company and originated by a bank partner, from whom the Company then purchases the loans and merchant cash advances obtaining all rights, title and interest or discount.”
Three Implications
FOR SHOPIFY The net book of loans and merchant cash advances was $2,350 million at 30 September, against $1,784 million at the end of 2025, per Note 6.
FOR MERCHANTS Shopify bought $1.5 billion of loans and advances in the third quarter alone, against $1.0 billion a year earlier.
FOR CANADA The Shopify Capital product in Canada moved from merchant cash advances to loans from April 2026, after Canada amended the rules in 2025, per the 10-Q.
The framework states: “Stripe isn’t a payments processor. It’s the financial infrastructure embedded into revenue recognition, subscriptionmanagement, fraud detection, and compliance workflows.”
As we read it, Shopify Capital applies the same idea to credit: Shopify buys loans its bank partner originates for merchants already selling on its platform. The framework was published in December 2025 and does not discuss Shopify.
What Is Not Established
The 10-Q does not give a loss rate, a yield or the bank partner’s terms, and the 64% and 46% rises are our arithmetic on nine-month totals. Charge-offs tend to follow lending with a delay, so a year-on-year rise in charge-offs can reflect last year’s larger purchases; the filing does not say so either way. The $4.3 billion and $4.2 billion totals are rounded in the filings.
The filing does not split the lending by country or say what share of merchants borrow. This piece does not draw on the earnings call.
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Shopify’s net charge-offs on merchant loans and cash advances rose 64% in nine months, to $166 million, while the interest and fees it earned rose 46%, to $271 million, by our arithmetic. It bought $4.3 billion of loans and advances in nine months, more than in all of 2025.
A note on sourcing. This piece is based on Shopify’s 10-Q for the quarter to 30 September 2026 and its third-quarter press release, both published on 3 November 2026, and on Shopify’s earlier 10-Qs and its 10-K for 2025 on SEC EDGAR. Figures labelled as ours are our arithmetic. It does not draw on the earnings call. We did not contact Shopify.
Gennaro Cuofano is a CRO and tech executive who has worked in AI since late 2015, starting with bringing NLP, natural-language generation, voice and chatbot products to the marketing industry. His background is in law and finance: he holds a Master's degree in Law and an International MBA with an emphasis on corporate finance (LUISS Business School and the University of San Diego, 2012), and worked as a financial analyst at a real-estate investment firm in San Diego and as an assistant controller. His work focuses on business model strategy, business engineering and, more broadly, structural analysis: how companies make money, read from their own filings. He created FourWeekMBA and leads research there and at The Business Engineer, his newsletter on AI and business strategy, with over 95,000 subscribers and more than 1,000 published analyses. His writing has also appeared on Entrepreneur (for example, How to Digitize a Family Business in Europe) and HackerNoon. Find him on LinkedIn and Substack. See how we source.
