What is the best way to fund a clothing brand
Starting a clothing brand isn't easy and requires significant initial investment for stock. In this blog we discuss the different types of funding you can procure as a brand and the pros/ cons of each.
5 minute read
So, you have a dream. The dream is to own your own clothing brand. You've thought about your branding, the clothes you're going to sell and even your USP. You live and breathe this idea and you have plucked up the courage to take the plunge and start the brand! But there is one problem, you have no funding and can't afford to start the clothing brand. Oh well, that's it I guess?
No, that is not ‘it i guess’. We are here to help you get your dream out of your head and into a shop. It’s true, it isn't easy to fund a clothing brand. However if you have a good idea, are focussed and have a clothing manufacturer in mind, you can get the funding and succeed. ‘What ways are there to get the funding?’, I hear you ask. There are a good few ways to achieve funding for your clothing brand and we are here to tell you about them.
You, your friends and your family
The first way you can fund a clothing brand is through your own funds and a little help from your friends (and family). You can use your own funds and loan money off of your friends and family to get your business off of the ground. You could even START the business with your family. Just because it's your idea, it doesn't mean you can't get help from your friends and family. They may be extremely interested in being a part of your brand and will be happy to help. This method can provide more flexibility and a more personal feel to your brand.
- Starting a business with your nearest and dearest.
- Flexibility in paying back the loans.
- People around you who will be positive about the business.
- They will be reliable.
- Owing your family and friends loan money
- May not get as much start up money as other methods.
Venture capital Financing
Venture capital is when well-off investors, investment banks and other financial institutions front the money to start up your brand. It is a form of private equity. Private equity is an alternate form of private financing where investors directly invest in companies. This is a very popular way for a clothing brand to start up. Investors will be looking for brilliant, unique and money making ideas that they can put their own money into to help a business grow and to help themselves down the line. The perfect opportunity for a venture capitalist is to invest while the company is small, and stay with them until the brand sees large growth. Eg.g investing in Facebook while it was still in Mark Zuckerberg's garage. In exchange for start-up funds an investor will get equity in the brand they are investing in, much like a Dragon’s Den situation.
- The money is yours to keep.
- This support can grow your brand quickly.
- The high profile investors can create big connections for your brand.
- Your investors can potentially own a big chunk of your company.
- Your company may not necessarily be ready to grow that quickly.
A more risky way to fund your new clothing brand is through the various loans that you can get. Most commonly this loan will come from the bank. This loan will help you get off the ground but unlike venture capital, it needs to be paid back. While it can be stressful having a loan that you need to pay back, it is also a way to get money to fund your brand without giving up equality in your company. You will still own all your company and pay back the loan comfortably if successful. However, it is best to go into this option with caution and back-up money that can pay the loan back if all goes wrong.
- You get the money you need to start your clothing brand.
- You don't have to give up any equity in your brand.
- You will be in debt till it is paid.
- You will have to pay interest on-top of the initial loan.
Factoring is another very common way to get funding for your clothing start up, if you are looking to sell wholesale. Factoring is a route of funding that is more specific than most other methods. Factoring is more of a way of financing your business than an investment in itself. A factor will front money for the business to start-up and grow and in return will take a portion of the customers money from the sale to pay themselves back after a certain period of time. A factor will also perform things like a credit check on a retailer before agreeing to ship any products. This ensures that the retailer is actually able to pay before completing an order. It is not the most simple way to get funding for your brand but it can be effective when done well.
- You have someone running credit checks before committing to an order.
- They will take money out of your earnings to pay back what you owe them.
Crowdfunding is a fairly modern way to get funding for your clothing brand, or any type of brand for that matter. Crowdfunding is usually online and is a way that you can showcase your idea and get funding from strangers that are interested. You will effectively pitch your brand online to knowone and depending on the effectiveness of your pitch, people will either put small amounts of money into your idea or they won't. You will need a lot of resources to get people interested; a website, images of your product, how you work, your business plan and much more will be needed to get strangers on board. It may be fairly risky but very effective if it works.
- It gets your idea out there to people you may never have spoken to in person.
- You immediately have customers who are interested.
- The investments will be small
- If the idea/pitch isn't good enough then it can be a lot of time taken for very little investment.
So, as you can see, there are many ways that you can get your clothing business off of the ground. It is up to you which route you want to take. Some of these routes to start-up your brand are less risky than others but if the risky ones work for you then they too can be a good way to start your successful clothing brand.