5 ways to raise capital for a shoe business

One of the major deciding factors of whether a shoe business can be started up or not is if you can raise the money to produce the shoes. I’ve explored a number of avenues on my own personal journey which I’m going to share with you in this blog post.

Shoe making needs significant investment to get in to. According to my financial forecasts I’m going to need around £20k to pay for set up costs, shoes and packaging. Start up costs include paying for a shoe designer, professional fitter, graphic design, website build, getting a trademark, photography, joining the British Footwear Association and more. In addition I will need funds to purchase my first season of shoes.

Like most start ups, there isn’t money just lying around to be spent on setting the business up. Most of the redundancy money I received is going towards living costs while I am on maternity leave so I needed to find other ways to raise the additional capital.

I explored the following options:

1 – Borrow from equity the house
I have some equity in a house I owned before I met my husband which I currently rent out, so I could have released some funds that way. I didn’t really want to remortgage given my current financial position (i.e. technically unemployed!) However, this may still be an option if the business goes well and I need extra money to buy additional stock.

2 – Borrow the money from the bank
Take a straightforward business loan from the bank. Most banks have business loans and I found www.moneysupermarket.com to be a good place to compare rates etc. A bank will expect a business plan and financial forecast to borrow from them

3 – Crowdfunding
My friend also suggested crowdfunding – very simply this is where you pitch your idea to ‘investors’ across the world asking for the amount of money you want to raise. Crowdfunding can be anything from investing in the company to get shares in the company or for something in return such. So for example I could say I wanted to raise £50k and as well as getting a share in the company a £250 investment would also get them a pair of shoes. It actually seems like quite a good way of getting pre-orders and also great for spreading word of mouth about your product.

There are lots of crowdfunding websites out there in the UK including www.seedrs.com which specialising in funding new companies. This is what their website says:

“Seedrs fills a gap in the early-stage funding landscape by giving innovative startups much more efficient access to a larger pool of investors throughout Europe to help them get their business off the ground and grow:
• Raise investment from friends, family and independent investors, starting at £10.
• Engage investors with videos, photos, Q&A and explanation – not wordy projections and documents.
• Benefit from a seamless fundraising process and the expertise of our internal investment team for one simple fee.
• Deal with only one legal shareholder instead of potentially hundreds.
• Maintain engagement with your investor network and harness their interest in helping your business grow all through the Seedrs post-investment platform.”

I’m a little nervous about going down the crowdfunding route as I’ll be sharing my business concept and idea and open it up to copying before I’ve even started. I may reconsider once my trademark and design rights applications have been confirmed and the business has started trading. I’m conscious that if the business starts to do really well I won’t have additional money easily available to suddenly buy a lot more stock.

4 – Save up the money yourself or borrow from friends and family.
Saving as much money as you can before launching the business, to not only fund some of the start up costs but also to have some extra cash for those unforeseen expenditures.
As I already mentioned I have a little money from my redundancy payout but I’ve also been fortunate enough to have my mother lend me some money without a time limit on when I need to pay it back!

What is also useful is where you can borrow money ‘in kind’. I have pulled in favours from old colleagues and friends and family and have secured some free PR support, a free website, a free tax return plus lots of accounting advice and graphic design at mates rates.

I’ve also warned my husband we’re going to be on beans and toast for a while!

5 – Start up business loan
Start up loans are a government backed scheme offered by various partners throughout the UK. This is the route I have taken to get most of the capital that will fund my business. The one I have chosen is delivered by Virgin.

Rates are competitive at 6% and you can choose the number of years you want to pay the loan back over. As part of the deal you also get someone who will help fine tune your business plan and you also get a mentor allocated to help your business get off the ground. The offer of a mentor is a biggy for me – I need someone who can guide me through the common mistakes new businesses make and reassure me that I’m making sensible decisions!

I had to translate my business plan and forecasts in to the Virgin one, which took hours! I didn’t mind too much as it asked a few questions I hadn’t initially considered. I had to send them off with my CV, proof of UK residency, my credit score and a form that listed my debts and repayments. The business advice I have been given so far has been invaluable, my business advisor happened to have specialist knowledge in IP protection and other legal considerations I hadn’t previously thought about. She also pointed me in the direction of other people who could help me with other areas I needed support on.

Given that I’m a start up myself, I’m hoping my chosen routes will work for me but I’d be interested to hear what has worked for you.

Read more on the business here.

Leave a comment

All comments are moderated before being published