7 Ways To Fund Your Fashion Startup

Many creatives toy with the idea of launching their own companies; the opportunity to independently pursue a personal passion is a major draw. But, in most cases, these dreams remain just that – dreams. The money to fund a start-up is often not available, and too many people are unaware of numerous funding options, as well as their advantages and disadvantages.

Majority of today’s successful businesses were boosted by a cash injection in the form of a loan. The reality is, very few people have the personal funds to launch a small business. It’s a huge expense, and financial assistance will be needed until the SME is self-sufficient and profitable.

If you have entrepreneurial ambitions, but are strapped for cash, don’t give up: you have a number of choices. Below are the a few options:

 

1. Self-financing

This is when you use your own money (usually savings) to finance your start-up. Think carefully about going this route: failure rates for new businesses are high and if your attempt doesn’t work out, you’ll lose both your business and your personal savings.

 

2. Money from friends and family

Typically, entrepreneurs looking for start-up finance turn to family and friends first. Though not the worst option, consider the advantages and disadvantages: on one hand, those close to you may be happy to invest, because they have confidence in your abilities. On the other, unless your friends and family are particularly wealthy, their financial help is unlikely to get you beyond the development stage. Furthermore, taking loans from family members and friends could test these relationships.

 

3. Angel investors

Angel investors are generally businesspeople themselves, or have significant capital and want to assist aspiring entrepreneurs. In return for a loan, these investors are given equity in the business. Besides funding, angel investors often offer mentoring and even one-on-one support, especially if they have experience in a field similar to the one in which the business operates.

 

4. Venture capitalists

Though a popular form of funding, venture capitalism is far from the easiest. Venture capitalists want a high return on their investment: equity is given to the VC in exchange for funding, but if the start-up fails to meet expectations, the VC can sell it to recoup its investment. On the positive side, VC funding doesn’t involve regular repayments as bank loans do. Most start-ups face irregular cash flow, so this means that any money that comes in can be used for running and growing the business. VCs also have lower personal risk; unlike loans from financial institutions, you won’t have to offer a personal guarantee.

 

5. Bank loans

Banks often lend money to entrepreneurs, charging interest on the loan. However, reputable financial institutions will not fund “high risk” start-ups or individuals; you have to prove that your business idea is sound and your finances are stable. This requires a variety of documentation, such as a comprehensive business plan, financial statements and valid identification. Even if this is in order, the bank will also check your credit status to ensure you are a “good risk” before finally deciding to grant you a loan.

 

6. Bridge loans

Commercial finance companies also offer funds to young start-ups in the form of short-term loans. This is to “bridge” the gap between needing cash to grow while still covering operations. In this case, your assets will be assessed along with your SME’s. If there is sufficient liquidity to repay the loan in the instance of default (in other words, if your assets can quickly be sold for cash to repay your debt if you can’t), a bridge loan will be granted. Like all loans, a bridge loan must be repaid within a certain time with added interest.

 

7. Government grants

Funding supplied through state channels usually has no or lower interest compared to loans supplied by banks. However, competition is fierce and standing a chance at having a loan granted means complying with strict regulations, including complete B-BBEE compliance. Though a loan can be seen as yet another responsibility, it’s better seen as a means to an end. Nothing worth doing is ever easy; the same goes for taking your brand to its ‘next’. A loan means repayments with interest in most cases, but it could also mean better advertising, faster equipment, larger premises – success.

 

 

Standard Bank

              

www.standardbank.com 
"Africa is our home, and we are focused on driving her growth." Standard Bank is  a universal bank and full-service financial group offering transactional banking, saving, borrowing, lending, investment, insurance, risk management, wealth management and advisory services. Their deep roots in South Africa provide a strong base for growth in Africa, and position them well to realise significant opportunities for clients doing business in these markets.