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How to Finance a Fashion Business?

5 Tips on how to Finance Your fashion StartUp

QUESTION:

I have an idea for a fashion product, that I believe can start a big new trend, but I don’t know how to finance the development of it. How do I find investors for my idea or finance a fashion business?

Richard

 

Hey Richard,

One of the biggest problems for most fashionpreneurs is finding a way to finance a fashion business.

The development of your idea will take time and perhaps countless samples and the time it will take you to develop and bring to market can by itself be a full-time job even for one product. And that is only the beginning.

So having funds to sustain you through this process is vital.

Looking for outside injection of capital is the preferred way for many. While this is an appealing option, you must realise first that this comes at a price – you’ll end up with some debt and/or giving up some control of your company.

The most common options to finance a fashion business are:

  • Friends and Family – this is often the easiest option. The people who know you best and are most passionate and invested in your success will be more willing to participate and help you on your journey. Often these are small injections of cash that will help you get off the ground, rather than see you through any considerable period of time (unless you have well-off relatives and they can invest a large sum of money). It is important to be upfront with these people and explain that there may not be a return on their investment or if there is – in most cases, it will take some time to see it.
  • Angel Investors – these are successful individuals who invest small amounts of money into startups in return for a small share of the business. Usually, you can find networks of such individuals and pitch them individually on your idea or more information on platforms like Investopedia.
  • Venture Capital – these are usually companies that represent a group of investors who put money into a joint pot (fund) and the company uses this money to invest in startups and larger companies that they believe in and see growth potential. Usually, these investors look for companies that are either experiencing a super fast growth or have an amazing idea they really believe in. Typically, investors would like to see a return on their money within 3-5 years.
  • Loans – these can be from a bank or loan organisation that operates in your country. While they are easier to get than the above options – it does mean that you get into debt immediately that you have to repay with interest within a fixed time period.
  • Crowdfunding – depending on how great your idea is and how experienced you are in marketing, another great way to finance a fashion business is crowdfunding. There are now many platforms like Kickstarter and many great examples of how other entrepreneurs launched their businesses that you can research into and learn from.

For more detailed information and other ideas, read our earlier articles on:

How to Fund a Fashion Business as a Start-Up. 
The Benefits of Crowdfunding for Fashion StartUps
Finding Investors for Your Fashion Business

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