Why you don’t need to borrow money to start a clothing line

Just a quick refresher on borrowing money to start a clothing -or sewn products- line. This is inspired after a phone discussion yesterday and from reading Why I don’t want financing this morning. First an excerpt from the computing industry:

…if you’re just building a regular old dynamic web site with no wild engineering issues, then you can, and in my opinion should, go it alone. You can rent a sweet production quality box for a few hundred bucks a month. That’s all you need. Eat into your savings. Borrow from friends and family. Eat Ramen. Scrape by. But don’t raise a ton of money, get office space and hire 30 employees. All you’re going to do with all that money is buy yourself all of the disadvantages that come with working for a larger organization. Politics, lack of accountability, and a new-found sluggishness to name a few.

However, if you keep keep it small and pop out a comparable site with just a few talented, hungry engineers then you have a much greater chance at long term success. The reason is that you are much more flexible. You don’t have as many stakeholders. You have time to let it evolve and grow. Push, watch, tweak, change, push, repeat. Then when you’ve molded it into the thing that’s just right and it catches on, you can raise a little bit of cash to buy some more smoking servers. But at that point you can raise the money on your own terms. They’ll be throwing it at you.

I concur with this view. I think chasing financing (or an investor) is largely a waste of time. Assuming you’re unlucky enough to score, they own you. According to this article, US Government statistics show that two-thirds of firms are self financing. I realize it’s not simple but you should have the means to get some samples together. You shouldn’t borrow money for that -assuming you could. You largely can’t you know, and you really don’t need to.


The person I was speaking with yesterday thought she did because the minimum she was quoted was much more than she needed, but that’s how suppliers do things. You can get lower quantities but you have to know how to ask. You can get five to ten yards of fabric from any supplier -if you know how to do it (pg.50-51). You don’t need a loan for that. Once you have samples together and pre-sell them, then maybe you can get purchase order financing (pg 184-). Your other option is factoring but I’m not wild on that either. You only need a factor if you’re selling to department stores and trust me, as a small player, selling to department stores is only glamorous in magazines.The cost of factoring will set you back an additional 20% of invoice. Without a factor, department stores will take six to nine months to pay you. Plenty of people make a profit selling to smaller stores. And sure, they will tell you that “everybody” gives them terms but that isn’t true. Only established accounts do. Most DEs collect at the time of shipping. Of course stores won’t tell you that but it’s true. Don’t make these top 10 financing mistakes, you don’t need to make a big splash. Take your time, as the excerpt above says, take the time to let your business evolve and grow. Push, watch, tweak, repeat.

I talk to people every week who are making business plans with the goal of obtaining financing and I have to bite my tongue every single time. People, you’re not going to get any money. Not now, not yet. At this stage, your line is just a concept, it means nothing. Words mean nothing. You can call your line edgy (please stop, stop it now or I’m going to impale myself on a thread stand) all you want but it doesn’t mean the same thing to a banker (edgy in banker-ese =high risk). Besides, they don’t care! You have to have demonstrables, samples, items you’ve pre-sold. With purchase orders in hand, you stand a chance. Otherwise, all that time you spent opening a vein over excel spreadsheets for your business plan is a waste of time.

Your time will be better spent sweating the details of producing your first samples. That you can do on your own with a little help from family, friends or a significant other. From there, grow holistically, internally. Plow whatever you make back into the venture. Don’t see this as a negative. If the situation progresses to such extent that you become a big brand and selling to department stores is the next logical step, then people will be crawling out of the woodwork to give you money. You won’t have to look for money. It’ll find you.

Related:
Financing a clothing line, is it time to borrow money?

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