About Clothing and Apparel Financing
The clothing and apparel industry includes many categories, such as clothing, fashion accessories, and even hair styling and fashion photography. There are many eCommerce businesses that provide different goods and services, each one fitting into a unique sub-category in apparel. When you purchase a shirt from an online boutique, you are contributing to this vast and important industry.
As unique as they are, their business needs are similar to those of most other eCommerce companies. They need working capital to keep their doors open. In order to procure inventory and avoid going out of stock, you need to pay supply chain costs like manufacturing, warehousing, and freight. While some businesses don’t need external funding to make this happen, many clothing and apparel companies need financing to grow. Cash flow can’t flow if there isn’t any money to support a business that wants to stock up on inventory to increase their customer base and revenue.
Financing Opportunities for Clothing and Apparel Financing
“You have to spend money to make money” is a phrase that many business owners live by. Supply chain costs are hefty, and they need to be paid before you even get the inventory to sell. Lack of cash flow can mean a halt in your operations. You have stock that needs to be replenished and goals that need to be met. Financing is the way to keep your business moving. With that thought in mind, here are a few of the best financing options available to clothing and apparel businesses.
Bank loan
A bank loan is money loaned to you from a traditional bank. They’re often stricter than non-traditional lenders and have a lengthy application process. If you get approved, they give you a lump sum of money and a specific time period to pay off the loan. This involves fixed monthly payments, regardless of your sales volume. This is a well-known option, but not always the easiest when it comes to receiving that much-needed cash.
Banks offer many types of business loans. However, the vast majority of banks don’t loan to start-ups and require that you be in business for at least one year. Each bank has different policies regarding eligibility, so be sure to do some research before applying. In addition, they usually require a credit check and may ask for collateral or a personal guarantee.
With the money to expand your business and inventory, you can finally grow. Just know that the bank will need you to disclose your business plans for the loan. They will monitor it and decide on the amount of money to lend you, which is not always as much as online businesses need to grow.
Line of credit
Lines of credit are wonderful short or long-term solutions, especially for eCommerce businesses that want revolving credit. As you pay off the loan, more money becomes available to you. It’s useful for day-to-day expenses as well as large purchases. The interest rates fluctuate depending on your credit history, so this can be a good or bad choice for you depending on your credit. As long as you make the monthly payments, you’ll have steady cash flow at your fingertips.
You’re only charged interest on the portion of the loan you’re using. They typically have lower interest rates than other options, and may be easier to access. The down side is the loan cap. Most of the time, these loans are on the lower side, and they often require a credit check to apply. In addition, the repayments may be hard for certain businesses to make on time.
You can find lines of credit at banks, but there are many other financing providers who offer lines of credit, too.
Crowdfunding
Crowdfunding is a group of people coming together to fund a specific project. Investors give money to a particular individual or business to fund an idea they believe in.
In order to succeed in crowdfunding your clothing or apparel business, your idea has to be unique or special. You need to catch the eye of potential investors, or they won’t choose to invest in you. One of the greatest benefits to crowdfunding is that you don’t have to pay back the money you receive. Depending on the crowdfunding platform you choose and your agreement with investors, you can choose to give them equity in your business or a reward in exchange for their investment.
Remember, setting up a crowdfunding campaign can be time consuming, and not every project is successfully funded.
Equity financing
Equity financing is the process of selling shares of your company to generate more capital. Ultimately, you are selling parts of your business in exchange for the financing you need. Investors that buy these shares from you can be family, friends, angel investors, and venture capitalists. This can also be presented as an IPO, or initial public offering.
Angel investors are individuals that believe that your business will be successful and count on a share of your future profits. Venture capitalists invest large sums of money in your business on behalf of a larger firm. Both of these investors often come with a network of connections and expertise in your field of business, which can be helpful to the future of your business. However, they will collect a portion of future profits and often wish to have a say in decision-making and the running of your business.
This type of financing is for startups who need cash and don’t mind giving away equity. If you want to keep full control of your business, equity financing might not be the right choice for you.
Grant
Grants are sums of money given by private organizations, the state, or federal government. You don’t have to repay a grant, unlike most loans. However, there are strict eligibility requirements to meet during the process. You also won’t have control over how you use the funds, as the grant-giving body will dictate how you spend the lump sum. Nonetheless, you won’t have to give up any equity or profits once you receive the money.
Grants are highly competitive, so you’ll have to put the work in if you want this type of financing. Your decision should be based on the amount of money you need, when you need it, and your eligibility requirements. Once you answer these questions, it’s easier to determine what kind of grant you need to apply for.
To apply, you need to do some research. There are many types of grants and each one benefits a different subject. The application and processing times are often long and tedious, so keep that in mind when choosing a grant.
Revenue-based financing
Revenue-based financing is a type of loan that you repay as a percentage of future sales revenue. Over time, you’ll return the full amount plus a fee for the service. Usually, investors collect monthly payments until the amount is fulfilled. It could take a short period of time or a long period of time to return the money to the investor.
Compared to other types of loans, this option is one of the quickest and easiest when it comes to the application. There are no credit checks and investors do not take equity in your business. Something to keep in mind, however, is that revenue-based financing is one of the more expensive types of financing. The cost of capital ranges from 18% – 40%, exceeding that of most traditional loans.
Despite the fact that it’s relatively expensive, revenue-based financing is often a good choice for online clothing and apparel businesses because they won’t have to stick to fixed monthly payments. Instead, they simply pay back a percentage of revenue, which fluctuates with sales due to seasonality and trends.
Merchant cash advance
Merchant cash advances (MCAs) are just that— cash advances. You receive a lump sum of money to go towards your business, and you repay that lump sum with your future credit and debit card sales. A percentage is taken out of each credit card transaction to pay off this type of financing. It’s easy to get approved since they have forgiving requirements, and often don’t require a credit check. In order to qualify, you must bring in a certain amount of credit and debit card revenue, though.
You can use an MCA for any expenses related to your business. Simply continue to repay the funds with credit and debit card sales until it is paid off. Agreements vary, but as with revenue-based financing, merchant cash advances tend to be more expensive than other, traditional financing methods.
Merchant cash advances usually have a quick and simple application process. They’ll determine your eligibility by the amount of revenue you generate. So, if you are just starting up or you don’t bring in revenue, this may not be the option for you.
Invoice factoring
Invoice factoring is a type of alternative funding that involves a small business selling their outstanding invoices to an invoice factoring company in exchange for cash. These are sold at a discount, so you’ll only receive part of your invoice up front. The discount percentage varies, depending on the type of contract you work out. Invoice factoring allows you to use that hard-earned cash before the customer pays their outstanding invoice.
It’s a great method for those who have large outstanding balances and long payment terms. If this sounds like your type of business model and industry, then it’s definitely worth speaking with a factoring company. They’ll determine your invoices’ worth, your company’s worth, and your business history. It also depends on the type of invoices you have.
Once they approve you, they’ll lend you up to 90% of the invoice’s value. Then, they’ll collect the payment from your customer directly. After the payment is completed, the factoring company will transfer you the balance of the invoice, minus a fee for the service. Sometimes these fees are quite high, so pay attention to your agreement.
8fig Financing For Clothing and Apparel Financing
8fig is a great option for those in need of online clothing and apparel financing. It’s a beneficial funding and growth platform that provides business owners the chance to plan, manage, and finance their business without the difficulties that come with strict eligibility requirements. With flexible funding from 8fig, you have a better chance of growing your eCommerce business.
Why use 8fig for apparel financing
Other financing options provide you with one lump sum that is difficult to pay off. At 8fig, we provide continuous capital for your business, right when you need it. This ensures that you’re optimizing your cash flow for growth. We’re also flexible, which means that you can change details of your plan, such as the funding amount and your payment schedule as you need.
How 8fig works
1. Apply
The application process is fast and easy. Answer some questions about your business and sales, and then provide basic information about your supply chain stages and expenses.
2. Connect your store and bank account
In order to provide you with an optimized Growth Plan, 8fig requires that you connect your store and bank account to the 8fig platform.
3. Get funded
With 8fig, you can get funded in just days. Since 8fig funding is continuous, you receive capital infusions into your business right when you need it.
4. Make adjustments
If something changes and you need to adjust your payments, remittance schedules, or even funding amount, you can always do so thanks to 8fig’s flexibility.
5. Grow your business
All that’s left to do is sell, sell, sell. With 8fig, businesses are able to scale 2.5x as fast.
What 8fig offers in addition to financing
There is more to 8fig than flexible funding. 8fig provides tools that your business needs to optimize cash flow, understand your sales, and grow your business. We are your partner in crime when it comes to growing and succeeding.
We want you to reach your goals because when you win, we win. Supply chain mapping, sales analytics, and planning software are just a few of the things we can offer you during your climb to the top.
Who is eligible for 8fig clothing and apparel financing
You’ve probably noticed how strict most banks are when it involves funding. 8fig is much more flexible, providing you the chance to grow earlier than you would have if you waited for another funding option to become available.
The application process is quick, and you can get your much-needed funds within days, not weeks or months. You are still in charge of your business. We’re just here to make things easier for you. If your online store has been in business for at least a year, your annual revenue is over $100,000, and you’ve made an average of $8,000 per month for the last three months, you’re likely eligible for clothing and apparel financing from 8fig.
How to apply for 8fig financing
It’s easy to apply for 8fig financing, and it only takes a few minutes. Simply answer the questions and follow the prompts and you’ll get funded in no time!