The best easy steps you always wanted to help fund your business

I have been in the Fashion industry for over 7 years and getting the right kind of funding is something I unfortunately overlooked for my new fashion business. This article will hopefully help you understand the financial support a label needs to get off the ground.

As a fashion business, you will face many challenges, but perhaps the hardest one will be to secure funding at an early stage. Being in the creative industry, you will need a lot of tools up your sleeves – public relations for your exposure, marketing and branding, reliable manufacturers, perhaps an office, and a solid business plan. This will also come handy when you are ready to approach investors.

Let’s begin with online lenders and banks, they can be a useful way of securing finance for small businesses, and often come with added benefits such as business advice. But if you are hesitant to turn to traditional methods of securing funds that may require him or her to put up valuable assets as security, I found some alternative ways to explore.

Payments coming from bigger projects or clients are exciting for a business. This is until you realise how long they may take to reach your bank account.

To explain better, the bigger the client, the longer they tend to take to pay you (sometimes several months). In turn, it might put your business in a difficult situation when you realise you are short on cash to pay for materials, your staff or suppliers.

To be successful within the fashion industry you need a reliable network of suppliers and that took a while for me to achieve.

I will take the example of the fashion industry, it includes a countless number of small and medium sized agencies. Additionally, these agencies use the service of countless suppliers themselves.

At the top of this supply chain sits the end-client with a big finance department and sometimes painfully long payment terms, and dealing with the right person can be a pain.

I have seen this cause complications more often than I can count: your client’s view of when it’s time to pay can differ from when your contractors and suppliers expect you to pay them. Unfortunately, they are also the ones in control. And if your client is overseas, things can get a whole lot worse.

What happen if you don’t pay your suppliers on time?

When you are late paying your staff and suppliers, you run the risk of them not wanting to work with you anymore which is understandable.

It’s extremely important to support them because finding new and reliable people can become a challenge. Especially, when you have ongoing projects in progress. Basically, when your client doesn’t pay you it’s not just you that suffers, it’s your staff and your outsourced agencies who experience the knock-on effect too (who knows how many additional staff they had hired to deliver your project?).

Therefore, having a visible supply chain for your business is essential. If you don’t get paid at all, an entire chain may collapse. This risk has always been there for small businesses but it’s growing.

1258 businesses had their say on the strength of UK supply chains based on an article I read on YouGov’s latest Supply Chain Funding index (SCFi).

In the SCFi, UK businesses rated the supply chain at 6.2 on a scale of 0 – 10, where 0 is the best score and 10 is the worst. In other words, UK businesses admit they’re running a near 36% risk of disruption in their supply chains because of the payment terms. This really is a call to action to find solutions.

So, it seems you have a simple choice: take it on the chin and carry the risk, or walk away from lucrative contracts because of the risk.

Could borrowing money be the answer?

You could ask your bank for an overdraft to see you through until your client pays your invoice. However, for a while now banks have been a quite reluctant to lend to small businesses: they view it as a bit risky for not much return.

If your bank won’t help, you can always turn to invoice discounting or factoring. Just like a bank overdraft, both this can mean debt – as you would typically end up borrowing against an unpaid invoice. These options will typically demand personal guarantees.

Learning it the hard way that trying to sustain a business with debt is not a viable long-term strategy.

There are a few alternative funding solutions – without debt

Positive news is that over the last 5 years the UK has undergone a huge influx of new finance solutions – fintech. It has enabled businesses to access finance where they previously had none.

If you look at Funding Xchange for example, it is a different finance model which can meet your needs and protect your business when you have your next gig lined up.

However, make sure to fully understand the terms and conditions of these alternative funders. What businesses typically overlook is whether the funder requires personal guarantees and how easy it is to end the contract.

I hope this has been helpful and I look forward to answering your questions in the comments.

You can’t give customers the value they demand if you can’t be sure of your cash flow.


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