Financing the Creative
It is time to turn around the phrase “creative financing” to consider financing the creative. Lansing Michigan’s newest incubator, The Runway, opened in October. At The Runway, twelve fashion designers are learning how to get their creative ideas to market and move their fledgling Michigan business to the next level. When The Runway’s designers and other members of Michigan’s creative class look for ways to finance their vision, what should they expect?
They can expect to face an uphill challenge if they walk into their local bank and seek traditional financing. Ideally a designer has no inventory – they produce to meet purchase orders and place goods in the hands of the retailer as quickly as possible. A designer is not likely to own valuable equipment. The value of the new designer’s trademark is nominal. Valuation of a “fashion business” is difficult, even in an established market. In New York City, home to a very well-established fashion industry, only designers with two or more years of successful production could hope to obtain a traditional loan.
So the creative need to be creative about their financing, early in their career. As a result, my conversations with newly minted designers, professors and industry experts at Fordham Law’s Fashion Institute’s 2014 Summer Intensive Program frequently turned to non-traditional financing. Three sources of non-traditional financing are of particular interest to a fledgling designer: crowdfunding; loans from family or friends; and factoring.