Clothing business finance for fashion brands, garment makers and textile mills

A clothing brand commits to a season long before it sells a garment. Designs are signed off, fabric is booked, and the factory usually wants a deposit with the order and the balance before goods ship. Goods then spend weeks in transit, clear customs and arrive in a warehouse, and only then does selling begin. Wholesale customers pay on trade terms after delivery; online customers pay at once but return a share of what they buy. A brand running two main seasons plus drops can have production for the next season in progress while still waiting for cash from the last.

UK manufacturers face a different version. A garment factory or mill carries yarn, fabric and trims, pays wages weekly, and is paid by brands on credit terms. Many depend on a small number of brand customers whose orders vary season to season.

• A large wholesale order. A department store or online retailer places an order bigger than the brand's cash can produce.
• Paying overseas factories. Deposits and pre-shipment balances in dollars or euros, with currency risk on top.
• Peak season stock. Building stock for autumn and Christmas, when most annual sales happen for many brands.
• Reshoring production. Moving some production to UK factories for speed and traceability, which needs new supplier relationships and sometimes machinery.
• Equipment for decoration and making. Multi-head embroidery machines, direct-to-garment and direct-to-film printers, heat presses, automated cutting tables, knitting machines and looms.
• Corporate workwear contracts. Uniform suppliers holding stock for a client's staff, often embroidered with that client's logo and unsaleable elsewhere.

Garments and fabric imported into the UK can attract import duty as well as import VAT, depending on the product and where it was made. The rates for each commodity code are on the UK Trade Tariff, and getting the code wrong can mean unexpected bills when goods land. Factories in Asia commonly invoice in US dollars, so a weaker pound between order and payment raises your cost. Trade finance providers can often pay in the supplier's currency, and some arrange forward contracts to fix the rate. Letters of credit and other tools for overseas sourcing are explained in our import and export funding guide.

The biggest risk in clothing finance is funding a season that does not sell. Borrowing to produce more than you can reasonably sell at full price turns a stock problem into a debt problem, and a revolving facility can quietly carry unsold stock from one season to the next. Be cautious about personal guarantees on large seasonal lines, and price in currency and duty before committing to an order. Alternatives include agreeing smaller initial runs with fast reorder capacity, made-to-order or pre-order models, negotiating longer payment terms with factories, and equity investment for brands with strong growth. If an HMRC bill coincides with a production peak, compare a VAT loan with Time to Pay.