Finance March 29, 2016 Last updated September 18th, 2018 1,042 Reads share

5 Ways Fashion Start-Ups Can Overcome Initial Finance Problems

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Fashion start-ups are products of love and passion. They are channels of creativity and platforms for expression. But like any other business to succeed, a fashion start-up, too, requires adequate funds to sustain itself and grow.

In this post, we look at feasible and smart ways to fund your business and overcome the initial financial hurdles.

5 Ways Fashion Start-Ups Can Overcome Initial Finance Problems

#1. Angel Investors

Who could be better investors for your start-up than those who are business tycoons and understand economics like nobody’s business?

Indeed, I am talking about angel investors. Try seeking out an angel investor for your fashion start-up. Not only will this make a financially sound decision, but it comes with other perks as well. Angel investors are entrepreneurs who have led their business to heights of success and are now willing to invest in a new start-up and take that forward too. When that new start-up is yours, you will receive the benefit of sound business advice and important connections through your angel investor.

And like all good things, angel investors don’t arrive easily either. It is one of the difficult sources of financing, but one that will yield you immense business returns. If you are wondering how exactly you can get an angel investor to fund your business, these pointers can help.

  • Skim down to entrepreneurs who have some understanding of your industry and can add value to your idea.
  • Identify entrepreneurs who have achieved success in your industry. Bring them on board as advisors, board members or investors. Even if they are not willing to be investors they can introduce you to people who will invest. Besides, when you associate with a known name, you lend credibility to your endeavor as well.
  • You should also keep in mind that when seeking out investors, look for local investors first. Angel investors often have a local bias.

Angel investors are most likely to come on board for start-ups that are new and innovative and fill a vacuum in society. So seek for never before ideas that promise utility. A good example of such a fashion start-up can be Chic By Choice, a fashion start-up that allows women to hire evening dresses and not spend large amounts of money on dresses they would probably wear just once.

#2. Bringing a Business Founder on Board

Seed funding is the funding raised at the initial stage in any business. Sure venture capitalists are the strongest sources of seed funding for any start-up, but they usually invest once the business has demonstrated its feasibility.

Besides the equity question always looms large when venture capitalists are involved. On the other hand, if you know someone who is interested in your business, has goals and vision aligned with yours, and at the same time has the resources that a start-up in the initial stages would require, get him or her on board as a business partner or co-founder.

Of the Inc top 500 businesses, 28% received seed funding from a co-founder. However, since a co-founder means equal control over the business, opt for someone who shares the same goals and ideas as you for the business. Nothing can quite spell failure for a start-up like conflicting partners.

This would also involve having a buy-out agreement in black and white in case of friction and breakdown in the business partnership. What this agreement should primarily contain is that the other partner should agree to a proposed buyout within a stipulated time frame or buy out the other partner themselves.

#3. Acquiring a Bank Loan

Trust your vision and want to be independent from the start? Opt for a bank loan. Banks are providing loans with terms and conditions that are extremely attractive for start-ups. It is one of the simplest ways to garner capital for your business.

Do your research and find out if there are any bank loan advantages your start-up qualifies for. Apply for them. On the other hand, even if you can’t access any special benefits or government guarantees, you can receive the desired loan amount by offering some form of security like your home as collateral.

However, if you think that you will never receive a bank loan once your credit rating goes bad or you get bankrupt, think again. There are credit providers who provide unsecured loans to people facing financial hardships. Affirm Financial is one such firm that will provide you with credit, even if you are facing bankruptcy.

The thought behind the unsecured loan is to help you rebuild your credit rankings and payment history so that you can establish yourself again and get secure a bank loan eventually for your business.

#4. Incubator Seed Funding

Incubating your start-up is gaining great popularity among first-time entrepreneurs. The reason for this is obviously the ample financial assistance that it provides in the initial stages of a business. On the other hand, incubator seed funding offers an array of other benefits that can help start-ups transform into profitable ventures in a short span of time.

Some of the benefits you can expect if you are successfully able to incubate your start-up besides financial assistance (access to loan funds and guarantee programs) are mentioned below:

  • Business Training Programs
  • Networking Activities
  • Marketing Assistance
  • Links to Strategic Partners
  • Technical Assistance
  • Mentorship

Incubator seed funding is also suited for fashion startups, because even in this technology-dominated era, physical space is important in this industry. Whether it is manufacturing, warehousing, or selling, a physical space could take you eons ahead of other start-ups.

#5. Crowdfunding

Recent statistics state that there are already over 500 online crowdfunding platforms with Kickstarter leading the troop. For the dynamic and multi-faceted fashion industry start-ups, crowdfunding could be your go-to initial funding option.

By opting for crowdfunding, you are pitching your business to a large number of people simultaneously for acquiring small amounts of investment. Pure logic states that this method will be more viable to get your desired capital than trying to convince a single investor to invest in your business.

To Conclude,

It is indeed a bold move to start off something of your own. Most start-ups face maximum hiccups in the initial stages and need extensive financial assistance. It’s very important to have a key plan at this moment, know what resources you will need and how you plan to source them, how you want to project your brand to investors and consumers and what exactly you want your start-up’s trajectory to be.

Make well-researched decisions regarding your financial requirements. Understand your business, and then opt for the best and most feasible alternative. Bootstrapping is an option, but when that seems impossible, you can opt for any of the above alternatives to give flight to your start-up.

Images: ”beautiful woman with many shopping bags on gray background  /Shutterstock.com

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Korie Cantor

Korie Cantor

Korie Cantor is a freelance finance writer from Toronto, ON. Her articles have appeared in a number of sites, including Affirmfinancial.ca, and Selfgrowth.com. She has a diverse background in health, fashion and lifestyle. When she's not writing, she's enjoying time travelling with her family.

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