How to acquire funds for a startup fashion business

Imran Amed of the Business of Fashion discusses Fashion Business Basics. He gave details on how to fund a startup business in fashion including various forms of financing.

"To start a brand is not difficult, but the main challenge is how to carry it on and make it grow. The fashion industry, in particular, is fast-moving." Disaya Sorakraikitikul of the fashion house of Disaya, a popular label in Thailand said in the Bangkok Post.

Likewise, according to the Business Fashion website, the expenses increase as the business grows, and the profit you've gained from the past quarter would not be enough to fund its growth. So every business needs financing to expand. Here are some financing options every startup needs to know.

You need to find equity investors. Private equity investors can be an individual or a firm. They will fund your business in exchange of becoming a part owner of your company. You would have to collaborate with them in the decision-making process as both of you share knowledge and expertise. Investors might give you advices and networks in building your business. Board meetings should be conducted regularly and you must provide reports for them to track the progress of the business.

Second, you could also acquire capital in a form of debt; it is when you borrow money that you will have to repay. A startup with debt means there would be a monthly outflow of cash to settle the amount they have lent. Forbes compared debt to equity; a debt is a loan in a certain period of time with an interest rate; while equity is a value of an asset in the business.

When you loan for your business, providers will not be involved in the company; they will only focus on your payback. In view of this, you will have the full control of your business.

Though cutting out money from your business will affect tax treatment. Taxes were not imposed on repayments but interests are taxed as ordinary income. Similarly, the return of investment is also tax-free, though profit or losses are taxed as capital gain.

Other ways are through competitions and awards. One organization, Caleres and Saint Louis Fashion Fund, had recently awarded six finalists for Emerging Designer Award worth $25,000 of capital.

These types of funds don't have interest rates and doesn't require giving out equities. Though skills and knowledge in the field will be measured and you will be judged by some well-known personalities in the industry.