Starting a fashion business is all fun and games; you have a ton of ideas, promotional plans and you have an overall perfect vision of a perfect fashion-related business…and then you come to the finance stage, and this is usually the headscratcher!
Whilst many people have filled their brains full of different business ideas, most will find it’s hard to actually fund them, or they may have started a fashion business, but it is hard to continue it as you haven’t got enough funds…but you are not alone in this!
When starting a new fashion business, you’ll most likely find you won’t be making that much profit (if not any) for the first few months if not years, but all this builds up in time. The first few months of your fashion business will be the most financially challenging, the next part is maintain it and using your profits effectively to keep your business running at a good level, especially if you have many competitors to compete against!
Luckily for you, in this article we will discuss some pointers and proposals that you can consider if you’re looking at different ways to finance your fashion business.
Family, Friends and Fools
This option may seem like the obvious one! Borrowing off close family, friends and ‘fools’ whom are willing to invest into your fashion business idea is always a bonus because it is with someone you trust and wants the best for your business. Your family, friends or fool who is willing to lend you some money may choose to either give you a loan that gets your business of the ground or may invest in it mid-way to keep your business running smoothly.
If you have this method as an option, it will most-likely allow you more flexibility than others, but ensure that you inform them it may take some time before they will get paid back.
Personal Savings or Inheritance
Some may consider this option quite risky, however it is definitely an option you should consider if it is available to you, especially if you have that ‘leap of faith’ attitude and your certain that your fashion business idea will have a promising impact.
Personal savings you may have built up over-time from part-time jobs you have worked and so on can contribute to your business idea. On the other hand, you may have gained some inheritance of some sort. Ideally, you could use it effectively but investing it into your business plan. Ensure that you use it fairly and intelligently so that you are getting the most out of your money, and most importantly, do not splash it all out at once. You need to make sure that you have some ‘fall-back’ money for any business errors you may encounter.
3. Business Plan Competition Prizes
Maybe you didn’t make it The Apprentice-so you won’t have that lovely conversation about your business idea to the good old Lord Sugar! However, there are plenty of small business competitions that you can enter, and most of the time the prizes are funding for your idea and if you’re really lucky, some mentoring and support from industry experts.
Some business plan competitions include:
- HBS- New Venture Competition 2019
- Rice Business Plan Competition 2019
- Milken-Pen GSE Education Business Plan Competition 2019
- Utah Entrepreneur Challenge 2019
- Next Founders 2019
- Technovation World Challenge 2019
- CodeLaunch 2019
- Burton D. Morgan Business Plan Competition 2019
- L Kaplan Business Model Competition 2019
- Pitch Competition 2019
Although these competitions don’t primarily focus on ‘creative’ aspects which may seem more convincing for your fashion business idea, it is still valuable to you as they support any kind of business ideas that they think have scope and potential. Apply if you have a set plan, a clear idea and clarity of who your consumer base is. You also need full knowledge of your finances, costings, profits and so on.
What else do you need?
- Intellectual Property Rights (IPR)
- Sales or potential sales
- Strong market research evidence
- Attractive shares
- Exit Route
You can also consider grants. Similar to business competitions, you will more or less be going through an application process and proposing your idea to a set of people, whom will then consider whether your fashion business idea is worth investing into.
Do not be alarmed though, these people do genuinely want to invest in as many small businesses as they can and help you. But to do this, they expect you to have a strongly executed plan and you will need to have mastered all the things in the list above from point 3. The more knowledge you have off your business idea, the more likely you will be eligible for a grant, and then you can truly kick-start your fashion business into action.
Some examples of grants include:
- Nottingham City and County Councils
- Learning and Skills Council
- Local Enterprise Partnerships (LEP)
- People Fund It
- Renewal Trust
- Regional Growth Fund (RGF)
- UK Export Finance (UKEF)
- Business Finance Partnerships
You can find out more about these grants here
What are funders looking for?
The most important question that may strike into your mind is; what are funders looking for?
Here is a small general idea of what they are looking for in you:
Funders are banks, angel investors (such as UKBAA), venture capitalists and general grant funders as stated above. All of these types of funders will be looking at key areas from you, such as; strong management skills, a well-articulated strong proposition, a USP and possibly growth sectors. These are they key traits you must have in your business plan.
Some funders will also look into if you have intellectual property rights (IPR), business growth/ profit generation, what type of business you actually have (dependant on the type of funder), an exit and shares.
Other things you need to consider when approaching a potential various funder include:
– Regular payments of capital and interests
– Trading business
– Security assets, personal guarantees
– Low / No risks
– A sector that they know and understand
– Control-board position or appointed director
– Data / Outputs
– There agenda
These are 4 different factors you can look into when finding people or companies to invest into your fashion business idea, and at least one or two should apply to you.
Some additional tips we recommend include;
- Explain your idea in simple terms and keep it brief
- Have a credible business plan based on sound market research credible evidence
- Be honest about gaps in the team’s skills
- Say how much cash you need and what it will be used for
- Ask for the right amount of money- don’t expect to go back for more
- Estimate the time to market
It is important to take notes of tips and advice as proposed in this article, as this will lead you to a successful business plan and even better, a funder. Take time in your planning and do not rush the process. Each category of funders all want to help get your fashion business idea off the ground and running, so plan, prepare and be proactive!
How Chanodil Can Help You
Whilst starting your fashion brand, it’s likely that you’ll still need to work that 9-5 job, or at least work part-time, to get some income coming in. This may seem almost impossible in terms of time management… however, with the help from Chanodil, you can manage the ordering and product process automatically, and we will help you along every step of the way to ensure that everything is running smoothly. Eventually, when your fashion business does get off the ground, you can quite that boring 9-5 and focus primarily on your fashion business. Let Chanodil help you start your business today, but signing up here.
Alternatively, if you’re thinking of getting a loan from the bank this may also be a long process and it can be unlikely that you’ll get the funding straight away. With our service, we can also help make this process easier. Find out more by contacting us.