Getting business finance for garments and clothing
Despite being one of the most ancient industry sectors, getting finance for clothing, textiles and garments has traditionally been difficult. Given that retailers purchase materials for clothing which are bespoke (therefore difficult to hold security over), often fragile, and of varying types (different sizes and shapes), financing has often been difficult.
What’s more, with the added seasonality of the clothing business (your garment sales might peak during the summer or winter seasons), maintaining a healthy cash flow is crucial for the business.
Have you got a fashion startup? Read our guide and top tips for starting a fashion business.
Top Tips for getting finance for garments
1. Know your supplier
2. Negotiate better terms
Open accounts and trust are often seen as a thing of the past now, and it might take a while before a manufacturer of garments trusts the customer (unless they are buying in bulk or have an established relationship). Negotiating slightly better terms however can not only save you money, but also reduce the risk (e.g. if I pay you in full only after you have shipped the goods, I have evidence that you’ve produced the goods, and I am certain to receive them in a known time period).
3. Consider external finance
At the same time, the business might have to pause orders from other suppliers until they have received payment, which can be costly in terms of time and opportunity lost.
Trade and stock finance is set out to bridge this gap. Businesses needing to pay for raw materials (up front) can use a Letter of Credit, which is a secure, backed financial instrument from a bank, whereby the bank or financial institution guarantees payment to the end buyer, or the exporter of raw materials upon shipping goods (on certain terms), which is almost a middle man between the two parties.
What’s more, once invoices have been issued, businesses can release money from those invoices using a discounting facility, thereby reducing the time lag between delivering goods and final payment. Many clothing suppliers and producers require some form of trade or asset backed finance to finance the production of their garments.
4. Consider currency risk
Finance for Clothing
We offer flexible clothing finance for the purchase of materials for, as well as finished clothing products. This could involve your company needing to purchase bulk clothing orders at a wholesale price from abroad, and that’s where we can help. Ordinarily, purchases such as these could negatively impact on your cash flow, however, by working with us to structure finance options you could benefit from a cash injection into your business and it could reduce your operating costs.
- Finished clothing
- Unfinished clothing goods
- Equipment and Machinery
Financing was needed by a medium sized company which imports clothing from Europe. The company sells predominantly in the UK. The biggest difficulty facing the company was access to capital when large orders came in from existing retailers and which widely varied throughout the yearly cycle. By working with trade finance providers it has improved existing relationships and allowed the company to work with more seasonal and varied clients.