A fashion designer’s guide to funding

In a moment that has married genius and art, you’ve had an idea for your fashion line. You are eager and ready to take the industry by storm. But before you think about featuring in Fashion Week or seeing your face on Vogue, you need funding. There are many options you have to seek funds. If you understand them all, you’ll be better able to decide which suits you. 

This guide will discuss funding for fashion designers, including:

• Business loans
• Family and friends
• Investors
• Crowd fundraisers
• Government grants

If you need a specific sum of money, you can apply for a small business loan. For example, if you look to rent a warehouse and purchase equipment to start producing clothes. 

To get a small business loan, you’ll have to convince a lender that you’re worth it and that you’ll pay it back with interest. Banks are not willing to give out money easily. To improve your chances of being accepted, think about putting together a business plan.

A business plan should include information about what you would like to do, including:

• Business description
• Products
• Competitors
• Target audience 
• Financial projections

For more information on writing a business plan, see: What should a business plan include?

If a bank is confident that you’ll pay back the loan, they can lend you the amount you need. The downside is that if you fail to pay it back with the agreed interest, banks could seize your business assets to cover it. 

If you’re a self-employed designer, you and the company are legally the same. As a result, you’re personally liable for your business and could have your personal assets taken. For example, the bank could take your car or house. Loans always come with an element of risk, but if you don’t operate a limited company that is a separate legal entity, you stand to lose a lot more.

Many businesses seek investments from family and friends. You can avoid the interest repayments and risk of a bank loan. Family and friend investments are the first option many entrepreneurs choose. It’s much easier to convince people who know you of your trustworthiness.

You can borrow from family or friends and pay them back as agreed. For example, if you need to purchase materials to fulfil an order, you can borrow them from a friend and pay them later. Alternatively, you can choose to give them a stake in your business in return for what they invest. 

Still, bringing family or friends into the business can create challenges. It can damage relationships with concerns about spending money or running the business. Disagreements within families often occur surrounding money, so you may rather keep work and home separate.

Another option you have as a fashion designer is to seek investment in exchange for a percentage of your business.

Business angels are wealthy individuals who seek to invest in small companies. Their motivations could be to make money in the long-term or give back to other businesses after their own success. Beyond funding, they can also offer connections and advice. For example, if a well-established designer invested in your collection, they would be an angel investor.

Fashion designers also can seek funding from the public without being at a late stage of the business. There are some types of crowdfunding you can use.

Suppose your fashion has a charitable purpose, like proceeds helping those with cancer. Then people can donate to the cause and accept nothing in return.

There may be something exciting about your fashion line that the public would want to be part of. People can donate in return for a reward later on, so you could get funding for your dress idea and send out prototypes.

The public can fund your business in exchange for royalties later. They would not become shareholders and can receive sales earnings. You could use this to launch your first collection, and then you would have the reputation to keep the money for your second. 

You can also apply for grants to get money that you do not need to pay back. With research, you may find different options available to you. The British Fashion Council has a trust which aims to grow small fashion businesses and provide support.

The criteria for the grant include:

• You have traded for over three years
• You sell any clothing apart from bridal or childrenswear
• You are registered in the UK with Companies House
• You define a project for the funding

As a self-employed fashion designer, you may not have been operating for three years or registered with Companies House. So, grant funding like this can be part of a longer-term goal towards growing your business. 

If you seek funding and manage to receive it, you’ll want to make the most of it. To become a thriving fashion designer, you’ll need to learn how to manage your finances, which can often be challenging while focusing on your next project.

By opening a current business account with Countingup, you can access everything through the app. It has built-in accounting software designed to make it accessible to business owners

You can sort costs quickly using Countingup’s expense categorisation feature, meaning you’ll always see where funding goes. Within fashion, there are lots of costs. Supplies, production, networking and marketing may be among them for you. So when it comes to financing, you must be able to keep track of everything. 

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