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Funding your Fashion Business

Wondering how to take your boutique to the next level? Looking into funding may be just what you need to up the ante for your business. Fashion business mentor, founder of Fashion Angel and friend of Marketplace, Alison Lewy has shared her tips to get you thinking about funding and how to work towards finding those all-important business backers:

Financing a fashion business has always been a challenge, due to the high upfront costs of developing and producing a collection, the length of time from initial investment to getting paid for your goods, and as we all know, building a brand takes time.

You may be able to start using your own savings but it’s likely after the first season or two, you’ll need to access further funds to help you expand and grow your brand. It’s not the industry for any entrepreneur or investor looking to make money quickly, but luckily there are a number of options available, depending on what stage you are at in your business journey.

The two main types of funding are:
• Debt based (loans)
• Equity based (giving part of your business away in return for cash)

Below are some of the options available to you:
• Bootstrapping: using personal time and money to get the brand up and running. Tough, but teaches you to be creative and scrutinise all expenditure
• Family, friends and fools: people who will give or loan you funds just because they want to help you
• Start-up loans: a government backed scheme to help businesses that have been trading 24 months or under to access a loan, which is great as comes with FREE business mentoring. As a delivery partner for the scheme, it’s been a lifeline for the 200+ brands Fashion Angel has helped to get a loan.
• Reward crowdfunding: online platforms that allow you to raise funds in return for rewards. Can be used to pre-sell products and get product validation, so helps to build your brand.
• Banks: overdraft, unsecured and secured loans - they have to be part of the mix, but it can be tricky to get a loan if you don’t have security to back it up and the interest charged can be prohibitive
• Peer to peer: there are online marketplace platforms who match people with money to invest with those looking for finance. Some give personal loans like Ratesetter, and others offer businesses loans to those that have been trading a couple of years – take a look at  Funding Circle
• Business growth fund: another government-backed loan scheme aimed at those trading for 12 months or more. At Fashion Angel we’ve assisted several of our clients to help use this to fund their expansion.

Many of the above options involve taking on debt. The other route is to attract equity funding, which is often the best option when you need larger amounts of money to take your business forward. Here are the options:
• Private angels/investors: there are private investors and business angel networks that organise introductions to groups of potential investors.  Ideally the investor(s) will also be able to help you with access to their contacts and business knowledge
• Equity crowdfunding: similar to reward crowdfunding mentioned above, but instead of giving rewards away you are giving equity away to a large group of small investors rather than just one or two large ones.

Investors often want to see proof of demand for your products, press interest etc. so finding them is easier once you are established and have a track record. You’ll need a well thought out business plan, a compelling pitch deck, and the passion and drive to make your brand a success. And remember…
• Finance is likely to be an issue at every stage of your business journey
• Allow time – most options aren’t quick!
• It’s often necessary to engage multiple streams of funding
• The good news is alternative funding options have made raising finance more accessible.

If you want to find out more how we help brands access finance, visit Fashion Angel or contact me via email or Twitter.

Good luck and see you at Seller Summer School on 5th September!

Alison Lewy is the founder of Fashion Angel, a fashion business accelerator offering mentoring, business support and access to funding to fashion industry entrepreneurs, and the author of Design Create Sell – a guide to starting and running a successful fashion business.