What is Garments and Clothing finance?
Garments and clothing finance
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.
Key clothing items include:
- Finished clothing
- Unfinished clothing goods
- Equipment and Machinery
When a business wants to trade internationally, the exporter would typically want to be paid up front by the importer. The bank would issue a Letter of Credit, which guarantees this payment to the exporter upon receipt of documentary proof that the goods have been shipped. This is then repaid once the importer has paid for the goods, which could be anything between 30-180 days later.
What is the SIC Code for Clothing Finance ?
The SIC Code is 14 (Manufacture of Wearing Appare)
Other SIC Codes that could also be used are:
- 13990 Manufacture of other textiles n.e.c.
- 14110 Manufacture of leather clothes
- 14120 Manufacture of workwear
- 14131 Manufacture of other men’s outerwear
- 14132 Manufacture of other women’s outerwear
- 14141 Manufacture of men’s underwear
- 14142 Manufacture of women’s underwear
- 14190Manufacture of other wearing apparel and accessories n.e.c.
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.