Finance options for starting your own fashion label

The whole world of fashion watches the leading British designers. The twice-annual London Fashion Week events are the biggest and most prestigious in the industry, with more than 250 top UK designers showcasing their collections.

There are some big names involved in the fashion business but, every year, there seem to be newcomers that take the industry by storm. So, what does it take to set up your own label – and join them on the catwalk?

As any experienced fashion-hand can tell you, it takes the ability to read the way fashion is going, before it has started to move. The entire industry works with a six-month lead time, and work will begin on each collection before the previous season’s range has even reached the retailers. Creating the clothes that sell needs originality and flair, of course, but knowing which way to take that originality spells the difference between clothes that stay on the racks and those that fly off them.

It also demands very hard work. Creating two, three or even four complete collections each year will mean not just creating designs, but turning those designs into wearable garments.

But ultimately, the biggest need of all for a new fashion label is having the funding to turn creative visions into saleable, must-have clothes.

A big financial challenge

The need to fund creative collections and production presents a sizable financial burden for the independent designers launching their own label.

Tying up investment in designs and stock for six months at a time demands the ability to make a major investment in that stock, along with skilled cutters, machinists and hand sewers and finishers, at a time when relatively little income will be coming in.

To make an impact with the trade and fashion press, any aspiring designer who wants to launch his or her own label will need financial support – and that will usually mean borrowing the funding required, first to create that all-important first collection – and then to build on the buzz it creates.

Most designers will admit that it cost a lot more money than they ever anticipated. Many go so far as to say that they might never have tried to launch their brand if they knew what would be required.

For the vast majority of labels, the big investors tend to be the major retailers who want to carry the ranges – but they don’t come knocking until business is truly booming. It means that would-be label owners could find that their own savings, along with those of family and friends, plus help from rich backers might all be essential to get things started.

In fact, many fashion labels are set up by designers who may have a successful family business behind them – but it does not have to be that way. It is true that lenders can often be reluctant to fund new ventures that they see as high risk – without a trading history, lenders may demand high rates if they will lend at all.

Gettin some expert help with sourcing new business funding – from a business finance specialist like Rangewell – can help find the lenders who will look at the future, rather than the past and will take a more entrepreneurial approach.

Putting that first collection together and ensuring that it gets the exposure it needs could well mean total costs of £100,000 or more. It’s more than probable that raising that kind of money to launch any business can really only be done with a Secured Loan, which means you will need to put up property such as a family home as security.

However, there are alternatives which avoid this kind of risk. Equity investors provide cash to invest in a new business. The best equity investors may be able to offer you smart money. This is funding which comes with expertise; contacts and other types of support that can help you build your business. However, when you take on investment from an equity investor, they become part-owners of your business, which inevitably means that you will have to share some decision-making with them, as well as your profits.

The next stage in building your fashion label

Of course, it is not enough to simply create a collection and, with it, launch a label in a blaze of publicity if you cannot capitalise on the interest the clothes create.

Getting a big order from a major retailer might sound like hitting the jackpot but, although it will be an important step towards success, it will bring another set of funding challenges.

Any order from a retailer will mean that a fledgeling brand needs to produce that inventory – and produce it fast. Materials, staff, machines and premises may all be required in very little time. It may be possible to put work out, but there will still be costs involved and worries about quality control and timings as well.

Rangewell helps businesses of all kinds find funding, and their team include experts in the fashion industry. They believe that there are a number of funding types that are particularly appropriate for the small fashion label that is ready to turn catwalk acclaim and their first few orders into a growing business.

Most companies involved in manufacturing will consider Invoice Finance, where a lender will advance funds based on the value of invoices as they are issued. This means cash comes in when each order is shipped.

Solutions also exist which can provide funding before goods are manufactured. As its name suggests, Purchase Order Finance can provide a cash advance based on a retailer’s order. This means that the entire production run, from buying in material, the skilled work and despatch, can be funded as soon as the order is received.

Getting the right funding to help build a label will be vital for success. It can help keep costs under control – but it can be vital to ensure flexibility, and that cash will be available as and when it is needed to seize an opportunity. In other words, getting the right style of funding for your style of business is crucial.