8 Ways to Finance Your Online Fashion Business

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online fashion business

With the growth of your online fashion business, you will also experience an increase in your expenses – they go hand in hand. All the actions you take to improve your old business strategies and the new ones you develop cost you. This is the way to go if your goal is to expand your business (whose isn’t?!).

When it comes to costs related to the fashion industry, they are all upfront, meaning that you need to spend a lot of money even before you start selling clothes. By selling those clothes, you can earn a profit you can use to create the next collection.

However, you might come to a point where you don’t make enough revenue to complete the project you have in mind. In that case, you need to look into some additional ways of financing your apparel business. Keep reading to learn more about the ways to finance your online fashion business.

As far as financing a fashion brand is concerned, there are several different ways you can do it. First of all, you can opt for asset finance, property finance, invoice finance, trade finance and working capital finance.

Moreover, there is also the option of merchant cash finance, outside investment and refinancing. When it comes to expenses fashion brands need to consider, there are a few including, digital marketing, photography, office expenses and professional help.

8 Ways to Finance Your Fashion Business

  • Asset finance

Small and medium-sized fashion businesses often work with the production, manufacture and distribution sectors and for them, the biggest financial investment is when they need to upgrade the existing machinery and/or equipment or purchase new.

Even though these tools and machines for vital for the future success of your fashion brand, they pose substantial upfront costs, which are often too high for businesses, especially in the first years of trading. Because of these reasons, many businesses nowadays are turning to asset finance to help them overcome these issues.

In this way, they can assess the assets without dealing with the huge upfront costs. You can choose among a few plausible options which will highly depend on your long term goals for owning the equipment.

  • Property finance

Another way you can help your online fashion business with financing is through property finance. Buying a property you need for your business is pretty expensive. Even upgrading or developing the existing one costs a lot of money.

In order to be able to do it, you should find a plausible commercial property loan to do it successfully. In particular, there are lenders who specialize in property finance market, and by contacting them you can learn more about your choices, You can use their services in cases when you want to permanently purchase a property or expand some part of your business, warehouse, office or the factory.

  • Invoice finance

Today’s fashion industry is highly competitive. Small and medium sized business often need to offer lengthy invoice payment terms to their clients, with the goal of attracting new orders. Even though this is great for your customers, it is not so great for your readily available working capital as it can be detrimental to it. These detrimental effects can leave you unable to fulfill new orders or grow.

If you resort to invoice discounting, you can draw capital from the raised invoices almost instantly. To do it in the right way, you should have a credit control team who deals with these things. Additionally, you can hire a third party who will do invoice factoring for you.

  • Trade finance

Fashion brands face various challenges. One of them is trying to increase the customer base without overstraining your cash flow. What can happen is that you receive a large purchase from a client, for which you don’t have the funds to finance the necessary materials or textiles.

In this case, trade finance can be a solution for you. By resorting to trade finance, your supplier is funded on your behalf. In this way, you get the necessary materials on time to finish the project and complete the order you received, increasing your revenue. It is a valid solution that can help your business in the long run.

  • Working capital finance

Working capital is the quintessential capital of every business, including the fashion one. Depending on the state you operate in, there are probably several working capital lenders who specialize in this kind of funding, particularly for the fashion industry. This funding can be used to grow your business, to expand your workforce and deal with regular daily costs.

If you are having issues with your working capital, you should definitely consider some plausible lending options. It will make your life much easier and you will feel more confident in conducting your business. After all, it will pay off eventually.

  • Merchant cash finance

Merchant cash advance is a plausible option for businesses who take regular credit or debit card payments from customers. It is a way of bringing additional capital to your business with repayments that are connected to machine processed payments.

By resorting to this option, you will be able to get a lump sum that will help you purchase additional goods, pay for some unexpected costs or simply help you with some market falls.

There are no fixed monthly repayments, but a small amount is taken each time credit or debit card is used to pay for goods on your website. This is an ideal way of financing for online fashion business owners as there are seasonal revenues that fluctuate during the year.

  • Outside investment

Another great way to finance your fashion brand is through various outside investments. For instance, if you have friends and family who are willing to invest in your business, you can resort to this way of financing, They might want to lend you money.

However, for most people, this is not the way to get some sizeable investments. If you need substantial investments, what you can do is consider various equity investors. The majority of them are always willing to hear out new business ideas, especially in the online fashion business world. What you need to have to make this happen is a scalable business model.

  • Refinancing

Refinancing would work for businesses that already own fashion production equipment, machines or property. In this case, refinancing would be the way to go, as you can raise capital without losing equity. Your finance partner can buy almost anything you own. Then, you can hire the equipment back or repurchase it.

You can set payments across a certain number of months or years – in the way that suits you. In this way you can keep the full use of equipment and raise lump sum of capital in the process. Assess the condition of your business and consider which financing options would work best for you.

Expenses that brands need to consider

When it comes to fashion businesses, there are certain expenses that you need to pay in order to succeed.

  • Digital marketing

The first expense that is quintessential in today’s digital world is digital marketing. You should set a budget for your digital marketing expenses. Advertising your business on various social media platforms and creating an SEO optimized website are crucial for building your online presence.

  • Photography

Another expense related to the fashion industry is photography. Photography is a critical aspect of business branding. It is a crucial and deciding factor which you shouldn’t skip. People base their purchasing decisions a lot on the quality of your photographs.

  • Office expenses

Office expenses might seem too low to be even considered. However, they can sneak up on you, so you should plan for them in advance. You should be mindful as not to go overboard with them, especially in the initial phases of your business startup. Don’t forget to count in the printing expenses as well.

  • Professional help

To run your business successively and in a comprehensive way, it is natural to need the help of several professionals. You need people such as retail consultants, tax accountants, bookkeepers, production consultants and financial advisers. What you should do is get a quote for these services so you can plan for them accordingly.

  • Creating samples

When it comes to the fashion industry specifically, there is also the cost of creating samples. It is a costly process you shouldn’t overlook. You should create a plan and calculate how much you money you need to complete this aspect as well.

Starting and running any business is not easy. It is often overwhelming and challenging. However, with effort and hard work, you can end up running a successful online fashion business, that is famous even worldwide.

To do this, you need to focus thoroughly on every aspect of the business and give your best. You need to work on improving it constantly and getting more education. The fashion industry market is highly competitive and there is a myriad of great fashion brands out there. You need to find a way to stand out from the crowd.

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Jess Cooper is a part-time journalist and blogger based in Sydney, Australia. She is an energetic, creative, highly motivated person with plenty of interests. The most prominent areas of interest include business, fashion, marketing, communications, real estate, and lifestyle. She enjoys giving business advice on startups, and she loves covering the topic of fashion, offering stylistic advice as well as where to find adorable skirt and blazer sets, evening gowns and formal clothing for different occasions.
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