Finance and funding for upscaling sustainable fashion

In Chapter 7, Lyon, Elf, Owen and Werner explore the issues related to financing early-stage sustainable fashion businesses. As these businesses grow, the demand for finance to support their scaling grows. Examining a sample of fashion businesses that have sought external finance, we demonstrate the existence of a finance escalator with early-stage businesses reliant on entrepreneurs’ own investment and that of family and friends, complemented by grant finance. As businesses grow and mature, they seek other types of finance but may be excluded from conventional sources of bank and institutional investment because of their ‘liability of newness and smallness’ and their focus on sustainability. Therefore, businesses seek alternative forms of borrowing and equity investment from social investors and business angels who are also well aligned with their sustainability goals. The authors also show that many businesses decide not to take on external finance as their business models show limited potential to generate a surplus for repayment, or they prioritise control of their sustainability goals over growth.