Why you might need a business loan for your apparel business
Whether you operate your apparel business online or from a physical store, managing cash flow can be a real struggle.
Ensuring you have stock of all the latest designs and trends on hand to fulfil customer orders means upfront investment in stock plus hefty storage expenses, with uncertainty about how long you’ll have to wait before you can convert that stock into cash in the bank.
A business loan could help you smooth out those fluctuations in income so that you’ll have the cash available to meet your expenses (such as tax, staff wages, insurance, rent or website hosting costs) as they fall due.
It could also help you with the cost of keeping your website and ecommerce systems up to date and fully optimised, or of refreshing the decor and display units in your physical store so that you continue to appeal to customers in the fast-moving and competitive clothing sector.
Marketing is key to the success of an apparel business, and you could also use a business loan to hire in the marketing expertise you need and run traditional or online campaigns to build your brand and get your products in front of more customers.
What are the requirements for getting a business loan?
Getting a business loan can be easier than you think.
While you can still expect to be knocked back by the big banks unless you have a solid trading history, a top-rate credit rating and collateral to offer, there are plenty of alternative lenders out there willing to offer business loans to clothing businesses.
Each lender will have their own criteria when it comes to things like credit rating, how long you’ve been in business, and how high your turnover is. If you’re higher risk (e.g. if your credit score is low) you may still be able to get a business loan, although you can expect to pay a higher rate of interest to compensate for that risk.
The most important factor ALL lenders will look at is your capacity.
Lenders need to know that you will have enough cash – after all your expenses – to cover your loan repayments.
How to apply for a business loan
If you are applying to an alternative lender for a business loan, the process is usually quick and easy:
1Create a business case to check how much you can afford to borrow.
2Prepare your supporting documents – expect to be asked for:
3Choose your lender and loan product – be sure to shop around, because costs, terms and conditions vary. Be sure to find out about hidden fees and compare all the costs of each product, not just the interest or factor rate.
4Complete a simple online application form and upload your supporting documents. Most lenders will respond within days or even hours. Some will even give an on-the-spot decision.
Grow your apparel businessSee if you qualify
What options are available to clothing stores?
There are several types of small business loans you could consider, to support or grow your apparel business.
Unsecured small business loan
A short-term option, unsecured business loans are usually for between 3 months and 2 years.
You can use the funds for any purpose, such as a new fit out. Many lenders will let you set a repayment schedule to suit your trading patterns.
There are several types of business car finance you can use to buy a van for business use, including car loans, hire purchasing and leasing.
While your work vehicles are under finance you will not be able to sell or upgrade them.
Business line of credit
A business line of credit is similar to an overdraft facility, giving you access to cash up to an agreed limit, often with the right to draw, repay and redraw funds as you need them.
You only pay interest on what you borrow, but there are often set up and admin fees.
Business credit card
Business credit cards are great for covering day-to-day expenses and making purchases, but unless you clear the balance each month the cost can be extremely high.
Before entering in to any business loan agreement, be sure to seek professional advice. It’s also important to ensure you understand all of the costs (including all fees). You can get a head start by using our business loan calculator.