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.

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

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  1. I agree with Kathleen on this. So many people jump in feet first, expecting to land that “big investor” at the get-go, but lose sight of what they really need to work on: undertstanding their target customer market, what are they looking to produce, keeping it small and simple, and so forth. Just because they may have some pretty sketches and some fabric swatches, does not make a designer and an entrepreneur.

    I can’t tell you how many people come to me, mainly some of my fashion students, who all expect to open up a retail business with their own designs (not understanding the concept of manufacturing, period and the whole concept of a retail store), and the amount of money and as importantly, time, you need to invest in your project before you launch it.

    Understanding your product is so important. I have people who want to start a new denim line (and how many more of those do we need?!?), and yet know NOTHING about denim! They don’t even know the knowledge needed such as shrinkage, or the different weights, etc. And when these people come to me asking me to consult them, I tell them that they need to take classes first and then get an inderstanding of the product and then come see me, but they don’t like hearing that. They want everything “instant” and that is not how a business, a successful business, starts.

    This business is so competitive, that all I can add is know your product, know your competition, and know the industry.

  2. Kim says:

    Kathleen, great advice. My background is in business and finance and I’m always surprised at how many new business owners believe they will get financing just starting out. I’m in the process of starting my small line and I’m going to pull $20k out of my personal savings to get things off the ground. I’ve also looked at local small business microloan programs sponsored by the SBA. After I complete my business plan, I think I may be able to qualify for an additional $25k line of credit, which I will use to finance the production of any orders. Having that initial $20k makes me a little bit more credible when asking for the line of credit.

  3. Karen C says:

    Words so true. When I came back from my stay and study in Italy five years ago, within the first month I bought and read your book. I then spent the next NINE MONTHS researching and writing my business plan, without making a single garment. I then tried to get financing, and nothing–butkus! I’m glad I was able to spend the time doing my business plan, because it is a blueprint of how I want to launch my business, brand it and grow it. But I wish I had spent more time on learning patternmaking and getting my samples made. I never knew how long getting a product made would take or how much money it takes to launch. People, listen to Kathleen, and just get something made first. Tweak it, re-draft your patterns, find your sources, etc.

  4. Kathleen, you never fail to impress me with your thoughtful advice. Running a business is hard work and so many people think that just because they’ve got an idea for something “edgy”, they’re all set.

  5. Jade says:

    I’m working on a sketch and the design has to have “specifications”. What are specifications and how do you do them? I am very confused?

    Thank you

  6. Sumiyyah says:

    Greetings – The comments are most interesting and fascinating. Those who are interested in starting their own line or manufacturing company, a word to the wise. It doesn’t happen overnight. The start up capital comes from “YOU” and your family. To really succeed you must have good business knowledge and be preapred to do all the jobs yourself until you hire competent workers. When you do hire them – stay out of their way and let them do their job. They are the experts! Business plans are nothing more than road maps that help and guide you along the way. You should have a short term, mid-range and long term plan. As well as a definite plan for growth. Don’t be afraid to fire slackers and incompetent personnel. They weigh you down.

    Oh yes the customers. Business is built on relationships not slam bam buy this garment and give me the money! The majority of my customers are friends because I care about them and their business. Their business is my business. If they don’t succeed then neither will I.

    Start small and build solid relationships with your customers. They’ll respect you and buy from you. Better yet they will refer their friends to you.

    I’ve had the good fortune of working in the business and learning along the way. Mu company produces women’s plus size clothes as well as menswear. I started in my house with two used machines and eventually grew the business to the point of having 4,500 sq. ft warehouse and office facility and launched a facility in two other continents. The methods are simple – not always easy but simple. No two ways about it you have to have a passion for the business and discipline to accomplish your goals.

  7. De'Andre Rucker says:

    I think I’m on the same page as you in the beginning. I am starting a clothing line and it is my family and friends that are buying my clothing. I you have time can you give me some advise?

  8. Jenny McDermott says:

    I am getting ready to start a line of handbag accessories and I came upon this website. All of these comments have been very helpful to me. Thank you.

  9. Abigail says:

    To De’Andre and Jenny:

    I started 5 years ago with absolutely no knowledge of the sewn goods industry. I bought Kathleen’s book over a year ago and wish I had know about it 4 years ago. It would have saved me a tremendous amount of time and money. The book is invaluable. That… is the biggest amount of advise I can give you.

    Good Luck!

  10. Portia says:

    I love when the articles are motivational & reassuring like this.
    Exactly one year ago to the day I “officially” started my business. I had been prepping for months after purchasing Kathleen’s book along with many others as reference. (hers was and still is my favorite.) Well today, exactly one year later, I delivered my finished goods to the boutique that placed my first order after viewing the sample collection.
    I started my line with my own financing supplemented with a 20K line of credit that I try not to touch if I can help it. My first season was only of six pieces which majority never even sold at market. However, for me that was not really the point. Of course I would have been thrilled to get minimum orders on every item, but I had wanted to start very small and grow slowly like is mentioned above favorably several times. I knew that the most important thing was to take those few orders and make my way through the entire process from concept – boutique as smoothly as possible.
    Along the way I have learned a lot about what I don’t like in a sample maker, pattern makers, and production. Fortunately the flip side is knowing what I do like now and how to get the best out of everyone in the process, including myself.
    I have found that building good relations with your local service providers is key to survival in the industry.
    Well I could go on and on but after a last minute covered button crisis before even delivering the goods today, I am wiped out.
    I wish everyone else just starting like myself, the best of luck. Cheers

  11. ayomidejpw says:

    I am confused is writing a business plan something that I shouldn’t be wasted a lot of time on? Maybe doing both writing and design would be a good way to figure out both things?

  12. This is such an insightful post! I having been weighing the pros and cons of getting outside financing, but now I’m sure I don’t want it. Def don’t want anyone to own me or lose my flexibility (one thing I consider my biggest advantage).

    Thanks as always!!!

  13. Karly says:

    OMG. LOL. I am so glad I found this site today! All the research I have done does not even begin to compare to this! I have been stressing myself out over a business plan when I don’t know the exact dividends to have in mind, and cannot find examples of it. I am still going to write my own business plan just to show myself what kind of outlook I have on this. I mean, it can always be changed, but you are right. You have to be able to produce a high-quality product to make it in this industry. You have to know “the right people”. Starting this out, I thought I was going to purchase a $20,000 printer. Boy, I was wrong! There are not enough hours in the day for me to print my own clothing. No matter how much my heart was set on having control over it. There are companies that purchase and learn how to use tools for exactly what you are looking for, they are already skilled in this and you would just be wasting a lot of time and money trying to do it all on your own. I can see your points clearly. I feel that if I don’t have a partner in this, financially that my brand is not going to get anywhere! I will consider more options. I guess most people are willing to let someone purchase them just to live out their dreams and it takes away that independence.

    I still don’t know all the ins and out. I am open-minded, but you kinda have to be if you want to succeed. I am still learning everyday. It is a lot more than I would have ever imagined, but I am still here, pressing forward. I was having huge issues with finding a clothing manufacturer and how my ideas and designs would communicate with some strange company that I have never seen with my own eyes and there is a certain trust that is missing from how most are representing themselves online. The few I contacted did not even reply. I am currently living in Kansas, but am planning on a move to California before any of this is able to begin. At least, that’s what is currently in my frame of mind. So I have stress issues on so many levels and the worst part of it all is the “not knowing” how this is going to pan out….!

    I am not yet a member of the forum because I do not have a job. I am disabled and I may be able to come up with the money for the book. I am sure it’ll answer some questions I still have that have been lingering. I joined http://www.t-shirtforums.com and did not find what I was looking for, but at least now I know that I must use my time and skills getting the business to boom instead of staying back behind the scenes. I have learned so much in only a week. I have had 10 tabs, at least, open at a time whilst researching this all week. My vision for my own t-shirts started back in November, but has been a dream for at least 10 years. I was focusing on graphic design and trying to get my designs out there, but with no experience people are not likely to jump on buying anything from you. Nothing has worked for me yet, so it keeps changing but in a good way. So excited to have found a site where there are people I might be able to relate to because I have started to think that I was doomed.

  14. Faith Vilakati says:

    Thanks all of the above has realy helped me too.I am in Swaziland (Africa) I also want to start my own clothing brand and have been working on my products,will see how every thing goes.

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