The Top Three Ways to Fund Your Fashion Business
I’m sure you’re aware you’ll need a substantial amount of money to fund your fashion business. This is why we recommend our clients have at least $10,000-$15,000 to start their first capsule collection. That way you can prepare to pitch to buyers and plan for production.
Keep in mind that the higher the price point, the more capital you’ll need. Most luxury labels start with at least $100K. The amount of capital you’ll need depends on the price point and market that you’re aiming for.
So what happens when you have some of your venture capital, but not quite enough? There are three primary ways to fund your fashion business if you don’t have enough venture capital.
#1 Reach Out to Investors
Seeking investors is always an option, but do your research first. Consider your business’s vision, trajectory, and existing cash flow. The problem with investors is that you’re giving away a piece of your business– (equity in your company in exchange for money). I don’t know about you, but I see my company as my baby and would I sell my baby?…. No! So consider that if you’re contemplating the investor route. Also, keep in mind that today’s investors are wary when it comes to a business as volatile as fashion. As a fashion start-up, having a track record of sales and a clear, focused target market is crucial before initiating a meeting with an investor.
#2 Borrow Your Cash Flow
Bank loans are an option, but there are a myriad of small business loans and grants that go unnoticed. They’re specialized small business loans and grant opportunities for minorities, women, veterans – even for those with bad credit. So do your research!
If you’ve been in business long enough to provide proof of sales, factoring is a great route to go. Factoring allows a business owner to obtain immediate capital based on future income demonstrated by invoices and Accounts Receivable. The transaction allows the business owner to purchase the “future funds” at a discounted price in exchange for the money upfront.
#3 Create a Crowdfunding Campaign
My favorite option of all is crowdfunding. Most have heard of Kickstarter or Indiegogo. The idea is you’re attracting a crowd of people who donate a small portion towards your business or project- and those small portions add up to a large amount! Romphim launched a Kickstarter for the first male romper about a year ago. Their goal was $10,000 and within three days they were already over $80,000. Just for creating the male romper! It received so much publicity which is probably why they reached $80,000. But crowdfunding is definitely the way to go – it’s amazing because you can raise money without giving up equity in your company.
Launching a campaign is very simple, but it’s not easy. It takes a lot of effort, planning, and preparation. I recommend planning at least nine months in advance before the launch to have a successful campaign. I actually teach how to launch a successful crowdfunding campaign in my online course, Cracking the Crowdfunding Code.
Crowdfunding Provides Priceless Market Feedback
Even if you didn’t need more money to fund your fashion business, the market research and the market feedback that you receive from crowdfunding is priceless. People will say, “Oh you should’ve made it 3 inches longer,” “This sizing is too tight,” or “Does this come in green?” You can use crowdfunded feedback to edit, tweak, and secure pre-sales before you even go into production!
Comment below or share if you found these tips helpful! And for weekly fashion biz insights, join our Fearless Fashionpreneur Facebook Group!
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