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8 Ways to Fund Your Fashion Business

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The world of fashion is intriguing, fascinating and exciting. Starting a clothing line and being part of it, is the dream of the younger generation.

There are multiple steps that lead to the launch of a successful fashion line. But mostly it falls under two broad categories:

  1. Creating and designing the collection.
  2. The business side of launching a collection.

Fashion schools do an amazing job in teaching how to create and design a collection, so we are not going to cover that.

But in this series of How to start a clothing line, we are going to cover the business side of launching a collection which has 4 subcategories:

  1. Funding
  2. Legal
  3. Marketing
  4. Sales/Web presence

For our first article in this series, we are going to cover: basics of funding. We will discuss how 8 ways to fund your fashion business.

As a designer, you don’t necessarily need to get money from the investors to launch your fashion line. But there are creative ways in which you can save money or get free grants.

  1. Sponsorship
    • Major fashion cities often have competitions where designers can win cash prices. Set up google alerts for any mentions about “fashion contest” or “design competition” etc. keywords, so you can receive an email when anyone offers it.
    • Fashion brands also offer sponsorships for new designers. Find out which brand resonates with your design philosophy and reach out to them.
      • You will be surprised they might have $500-$2000 in the budget to encourage new designers, even though they might not publicize it.
  2. Free fabric
    • One of the major expense when creating a new collection is fabric cost. You can mitigate that cost by finding out new fabric manufacturers in your area or overseas who want to get into the business.
    • Websites like Alibaba.com can be a great source to find local manufacturers and request free fabric especially if they are new and need sales to build credibility.
    • They could be interested in giving you fabric for free or at discount in exchange for some publicity.
  3. Pre-sales
    • From customers:
      • Entice your customers with special incentives to get pre-order from them. You don’t necessarily have to utilize crowdfunding platforms for this but you can take pre-orders on your site.
      • e.g: If you are selling a Jacket, upload the image of the jacket in 6 colors and ask customers to place pre-order for the color they like. And state that top 3 voted colors will get manufactured. This way you only need to manufacturer 3 top colors and don’t have to spend money on the remaining 3 that got lowest pre-orders. And you would have collected money for your first batch.
    • From retailers
      • This would require you to build a relationship with the retailers and some negotiations.
      • Typically, retailers would only pay you after your product sells, but you can negotiate with them to give you deposit for your collection.
        1. If the retailer likes your collection, you can offer the exclusivity for next collection if they give you deposit now.
        2. OR, you can offer them free marketing campaign on your Social Media page, as to bring more publicity to the retailer. This could be beneficial for them because it would save the marketing dollars and get them word of mouth marketing.
  4. Crowdfunding
    • Kickstarter, Indigogo etc platforms are great for running crowdfunding platforms. These platforms are great for generating hype for your product.
    • If your goal is to make money thru these platforms, I would highly recommend, run your numbers and make sure you incorporate potential changes in product cost.
    • This would be a great way to launch your first collection at cost, even if you don’t make any profit. Because if done right, it can put you on the retailer’s radar for your next collection.
  5. Payment terms with Retailers
    • Most of the retailers promise to pay within 60-90 days after the item is sold. For a new designer, this could make or break their business.
    • Work with your retailer’s request terms with Cash on Delivery or Cash on Sale. This will bring revenue back in your pocket and can keep you afloat for the longer term.
  6. Consulting
    • As a young designer, you are probably more in tune with latest social media platforms. You can offer consulting services to the retailers, fabric manufacturers etc. and generate some money.
    • This has dual benefits:
      • You will be able to generate money.
      • You will be able to develop relationships with retailers and fabric manufacturers. And when the time comes, you can leverage those relationships to get better payment terms.
  7. Equity
    • There are various types of equity investments. Most popular ones are:
      • Angel investors
      • Venture Capitalists
      • Friends & Family
    • There are pro’s and con’s for getting each type of equity investor and you should weigh them:
      • Pros:
        1. You will get immediate cash to run your business.
        2. They can provide expertise, connections & resources.
        3. They can open doors for you that otherwise would be very difficult to open.
        4. If your company goes under, most likely you will not have to pay back the investment.
      • Cons:
        1. They would require a seat on your board.
        2. They would take significant equity from your company, depending on what stage you are in.
        3. They may or may not keep an eye on your operations and would get involved in them.
    • Angel Investors: There is list of angel investors that invest in Fashion startups. You can find the complete list here. Please do your due diligence before picking an investor.
  8. Debt
    • Debt is a loan that you can get from banks, credit unions etc. You will have to pay back the investment with interest.
    • They would probably require some sort of collateral in exchange for the loan. If you are young and don’t have any collateral, banks can request a signature from your family and use their house, property etc as collateral. Please be careful when involving family’s assets because if in any case, you are unable to pay back the loan, banks can come for your family’s assets.
    • Please talk to a lawyer before signing up any investment terms.
    • You can get loans at:
      • Banks, Credit Union
      • Line of credit

As you can see there are various ways to start your clothing line & fund it. So, please do your due diligence to make sure you completely understand the do’s and don’ts of any type of investment you undertake.

Our goal was to provide you with different options that can help you. You can use any combination of them. But we highly recommend involving a lawyer before signing up and choosing any investment options.

3 Comments

  1. Nick Thomas says:

    I like #2, 3, 5. I will def going to work with my retailers to get paid faster. currently I am getting paid 60 days after the sale which puts pressure on my cash flow.

    • Vishal Kalia says:

      thanks Nick, I am glad its helpful. These small changes can make huge difference. Let me know there is anything else I can help with.

  2. Jenna says:

    Thanks for the comprehensive list here. Many different ways to get a boost when getting started, will be helpful!

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