Funding your business

There are many sources to fund your business, it could be your savings, it could be your family, it could be your current income from employment and nowadays you could also look into crowdfunding websites which besides providing you with an initial capital to start up it also allows you to validate your business idea in the crowd.

These are all valid forms of finance to kick start your business however once the idea is validated and you want to grow or scale up, then your business would require a more sizeable funding stream to allow it to grow to another level. 

One can classify this second step of funding your business into three funding options (i) Equity (ii) Grants and (iii) Debt Finance. 

I. Equity funding - In the case of equity, your business would need to seek an investor or business man who believes in your business idea and would be keen on providing their own funding to acquire a percentage shareholding of your business.

Equity financing could be an option if you see growing your business with this new partner in view of the potential access to new markets which he can provide you.  In equity financing you need to be comfortable in sharing the potential increased profits with this new partner.  If as a business you are comfortable with sharing knowledge and profits, equity financing may be a valuable financing route for your business. 

II. Government or EU funding – The Maltese market has a number of grants and tax credits originating from the Maltese Government either via Malta Enterprise – or EU grants via MEUSAC -

These grants are designed to address market gaps (i.e. Start-ups, R&D, Innovation, tapping into new markets) which are useful funding streams to assist businesses overcome specific barriers.   However considering their finite nature grants will always be a limited source of finance and need to be seen as part of your financing solutions and not an end in themselves.

III. Debt funding – better known as borrowing from banks is the preferred financing option in the Maltese market as was outlined by over 70% of the respondents in the Survey on Access to Finance for Enterprises (SAFE) compiled by the Central Bank of Malta. Whilst seeking funding from a bank for the first time may prove daunting engaging with a bank to review your business idea may prove to be an opportunity to refine your thinking before financing such a project. 

To improve access to finance particularly for SMEs the EU Commission has developed a number of financial instruments for banks across Europe. 

Bank of Valletta through its EU representative office has positioned itself as a leader in the field of EU financial instruments and has launched a number of such products in the market which can be accessed via -

The above funding options are not mutually exclusive and every business requires a healthy combination of the above options depending upon its area of operation and size.

IV. Crowd Funding

What is Crowd Funding?

Before technology’s all-encompassing grasp on our lives, if you wanted to launch a new idea, you would have turned to the government, to the bank, or to an angel investor to help get your concept off the ground. Today, though, another option exists: crowdfunding.

Put simply, crowdfunding is an online funding method that allows your friends, family, past customers and potential interested investors to finance your idea or project by donating relatively small amounts of money to it. And, since this can be achieved online, it has become an increasingly-favoured funding method worldwide.

There are lots of benefits to crowdfunding, including that it makes it so much easier to present your idea to the world via social media and other online platforms. That means it’s also easier to keep your backers up-to-date on the project in question – and to encourage them to dig deep and help you to achieve your target.

Should I use crowdfunding?
If you’re thinking of crowdfunding, then you should start by asking yourself the following questions about your project:

  • Does it target the mass market?
  • Is it innovative or create innovation?
  • Is it unique?
  • Does it solve a problem?

If your answer to these questions is ‘yes’, then it’s worth pursuing crowdfunding to make your idea a reality.

Types of Crowdfunding

There are four main types of crowdfunding campaigns:

  • Donations-based Crowdfunding
  • Rewards-based Crowdfunding
  • Equity-based Crowdfunding, and
  • Loan-based Crowdfunding.

You may also encounter other variations of these, such as Real Estate and Human Capital Crowdfunding. However, as a budding entrepreneur, the main four should be enough to get you started.

Donations-based Crowdfunding
Arguably the simplest form of crowdfunding, this system asks individuals to donate a small amount towards a target goal, all the while receiving nothing in return.
This method means you won’t have to relinquish any shares or rights in your project. It is particularly effective if your campaign is directed towards a charitable cause, not-for-profit organisation, or funds for student fees, for example. In this case, your audience should consist of people who are empowered and satisfied in knowing that they have helped a project they feel strongly about.

Rewards-based Crowdfunding
This system asks backers to donate money to your campaign but promises a reward of some kind in return. The reward you give depends on the donation received, and campaigns usually outline their rewards in advance.

It all depends on your project. For instance, if you’re thinking of releasing a game, possible rewards could include a digital download of the game once it’s made, or a mention of the backer’s name in the credits. You could even choose to send the reward of a hand-written thank you note.

Equity-based Crowdfunding
This system is a little different, and funds are gained by offering shares in your project. Essentially, it works like the stock market would, with the exception that your company would not be considered to be publicly-listed.

One of the challenges of this type of crowdfunding is that you will have to work even harder to attract the attention of backers, who may be put off investing in such a young venture because it could lead to a potential loss of capital, illiquidity, dilution of shares, and a significant decrease of dividends.

Additionally, this kind of crowdfunding is not currently available in Malta, since there is no proper legislation regarding equity-based crowdfunding at the moment.

Loan-based Crowdfunding
Also referred to as Peer-to-Peer (P2P) Lending, this system asks the same of your backers as Donations-based Crowdfunding, but asks something different of you. Just like with a loan, you would be expected to pay back all the money donated to your campaign, with added interest. Backers interested in investing in your project may be drawn to this because they are likely to receive a better return on their investment than if they had just invested the same amount of money in a bank or savings accounts; this is mostly due to reduced transaction costs online. P2P loans may be asset-backed as well, in which case the backer will be investing against an asset of yours, as an entrepreneur.

Like in the case of Equity-based Crowdfunding, there is currently no legislation directed at this form of Crowdfunding and, as such, it remains unavailable in Malta.

Most crowdfunding platforms will also have one of two policies, these being:

  • All-or-nothing, and
  • Keep-it-all.

In the case of all-or-nothing, you can only lay claim to the invested money should you reach your target goal, or if you were to exceed it. If the target goal isn’t reached, the money will return to the backers.

With keep-it-all, which is usually offered to philanthropical causes, you can keep any funds you receive. However, even if you don’t reach your target goal, any rewards that you had promised (if the crowdfunding used is Rewards-based) must be returned to the backers.

Campaigning: A Guide

It’s easy to assume that crowdfunding is as simple as creating a Facebook page and letting it do the work for you. Unfortunately it’s not that simple. After all, the Internet is full of people vying for your attention, and there are thousands of people out there trying to get their project successfully campaigned. So, if you want your campaign to success, you’re going to need to put some hours in – and the best way to start is my planning your campaign.

There are three key milestones to hit:

  • Pre-Campaign
  • During the Campaign
  • Post Campaign


This may be one of the most challenging parts of your campaign to plan but it will be worth the effort if it means that your campaign itself will run that much more smoothly.

Trust a Professional Team
When you’re planning a campaign, it’s vital to have people around you that will listen to your ideas and give you valuable feedback. Thus it’s important to work with a group of qualified people, just like the team at ZAAR, who will guide you on everything from your concept to your campaign plan. 

Set up Your Own Team
Although it is entirely possible for you to spearhead the entire campaign by yourself, it is helps to have other people around to take on the myriad roles that need to be filled. They could be people you know and trust, or individuals who share your goal of seeing your project succeed. Above all, look for people you know are good team players.

Plan the Goal Value
Projects with a relatively small and achievable target goal are much more likely to succeed in crowdfunding their campaign. So, if your goal is to reach a large sum, the best plan of action would be to split that sum into manageable goals and achieve them over time.

Beyond that, remember that no one likes being the first at a party. Thus, before you go live with you campaign, make sure that 20-30 per cent of your target goal has already been confirmed by family, friends and by your already-established fanbase.

Researching similar campaigns to yours across different crowdfunding platforms and seeing what helped and what didn’t could be very beneficial for when you go live. Observe how they interacted with their backers, the tone of voice they used, what self-promotion they chose, their timeline, the rewards they offered, and how they sold their ideas. Also, make sure to take note of what happened in cases of a failed campaign so you can avoid making the same mistakes yourself.

You could also take a look at campaigns that you are willing to back, so as to gain the experience that your backers could be getting from you. Take notes on how that campaign caught your attention, or what happened once you pledged your contribution.

It’s been proven time and again that keeping your campaign short (perhaps around a month) is better if you want to maintain momentum. Generally, campaigns receive most of their backing at the start of a campaign, and this dwindles over time. So, if the campaign is viable, a steady number of backers will donate until the conclusion, with a final surge at the end. When planning the dates of the start and end of your campaign, remember to take the time of year and the ability of your backers to pledge to your idea into consideration.

Stretch Goals
Instead of aiming to achieve your entire target goal amount at one go, you can instead use stretch goals; these set different benchmarks for the funding of a project. This would serve as an advantage in a way that you’ll be able to start working on your project without having to reach your ultimate funding goal. Additionally, by prolonging your campaign and making sure that it remains fresh, you can also increase the chances that backers will ask their friends to donate as well.
When planning to use stretch goals, take note to detail a full outline of each goal from the very start of the campaign.

When thinking of the title of your campaign, try to make it sound catchy, short and interesting. Making your campaign inspirational from the start will be sure to attract backers’ attention.

As you go along, add people who you know will be interested in your campaign to a database. You can include family, friends and acquaintances. Ultimately, this will make it easier to keep track of contacts for updates and newsletters, as well as to maintain the details for sending out rewards.
You could also use the database to ask your contacts for promotion.

Although this may be the costliest part of your campaign due to cost of production and shipping, it is also one of the most important elements that will ensure your campaign’s success. Rewards can range from personalised notes to a bespoke video with a special mention. The idea is to make the backers feel important through benefits and rewards they can only get from supporting your campaign. Making these rewards as simple and as trouble-free as possible will also entice interest.
Always ensure that you are clear about what the backers will be receiving and by when. Another thing to keep in mind is to have a limited amount of offers available to avoid confusion and increased costs.

Creating something that is positive and believable should be your priority when it comes to creating anything related to your campaign. Thus, keeping your tone simple and friendly in posts will help in maintaining your image, as well as in making your backers feel comfortable within your campaign, despite not the having technical knowledge of the subject that you do.

Once you start thinking about your image, we recommend starting with a catchphrase or slogan, followed by the creation of a description of your project that is simple, accurate and informative. The next thing to focus on is the logo and the choice of brand colours; here you should try to find something that matches the same project you’re going to crowdfund. Before publishing anything, ask someone to proofread your copy and give you feedback on the campaign content as a whole.

When setting up your crowdfunding page, it’s best not to focus on its length but rather on its content. It is especially important that the following points be introduced and explained:

  • Introduction
    • This should explain your project in short and start to introduce the backers to the campaign image you are trying to create.
  • Problem
    • Why is the project needed? Why should backers care about funding the solution?
  • Solution
    • Any details needed to explain how your product solves the problem.
  • Expected Outcome
    • What’s going to happen once you reach your target goal?
  • Specify the Timeline
    • Project the entire timeline for the project, including when the idea for your project came to mind, what has been done so far, and what you plan to be doing in the future.
  • How Will You Use the Money?
    • Whether it be for purchasing raw materials or to fund research, people need to know where their hard-earned cash is going.
  • Explain the Rewards
    • Detail the difference between your rewards and explain how exactly what backers will receive based on the amount they pledge.
  • Who you are?
    • Introduce yourself, your team and your vision.
  • Validation and Testimonials
    • Has anyone used your product? Have experts taken an interest in your vision? Let people know.
  • Call to Action
    • Draw a strong conclusion. Make the backers feel empowered to invest in your project.

Whether it’s infographics or photos, soundbites or animations, you can use anything at your disposal to sell your idea to potential backers. Multimedia attracts attention, and is often more impressionable than an essay.

Making use of a short video is, thus, crucial when it comes to helping people understand and interact with your vision. Try making a video that is both inspirational and aspirational, as this may be your only chance at getting backers give your project another look.

Not sure where to start? Look up past local and international campaigns that are similar to your own project in terms of inspiration. You could also ask your creative friends, or your team of professionals.
Also note that if you are creating artwork or taking photos of the campaign’s process, it is worth making a list of the things you’ll need for different platforms (like Facebook or Instagram) as this will save you time and hassle once your campaign goes live.

Before the Launch
Having completed everything listed above, it is now almost time to go live. But first, there are three more steps to go before you can launch your campaign into cyberspace.
First, prepare the content to be sent out to family member and friends so that you can inform them once the project goes live. Together they will not only make your work look credible, but could also help in spread the news.

Secondly, create a portfolio of images you can use when promoting your campaign. This can be used for posts on social media or articles in the press, among other things.
Finally, set up your social media channels, and create a launch event for supporters and the press so that you can kick-start the campaign with a bang!


Now that the preparations have been set up and the campaign has gone live, the next set of steps can begin. The work needed at this stage is less varied, but it will be necessary if you want to maintain a steady flow of backers, even after the first surge.

The same database you set up in the pre-campaign round is going to be necessary here. Use it to stay in touch with your contacts. While doing so, remember that you shouldn’t keep newsletters uniform, but create different ones according to the section the contact is in. For example, amidst your contacts, you’ll find the ones you’ll contact to ask for help, others that will share or spread the word, and others who will invest.

Keep in touch by sending updates on the project and the campaign, too, as well as on upcoming events or activities. This would also be an optimal time to take photos of the creative process leading to the final result; these photos can be shared with your contacts or posted on social media.

As time goes on, you’ll also find it useful to update any new backers or fans to your database. After all, since they’ve invested in your project, they deserve to be kept in the loop.

Via the media or online through social media, use anything and everything you can to promote your idea. Make sure you set up different accounts or pages on social media including, but not limited to, Facebook, Instagram, Twitter and LinkedIn. Think about and research tags and keywords that you can use to help users find your project amidst the many campaigns out there.

Remember to maintain the same tone you used in the description throughout, and stay friendly, informative and honest. It also helps to reply to people’s questions, to be objective, and to show them how to be a part of the image you want to create.


Don’t be afraid to add new information or to create new media to promote your project and get people interested. While doing so, also assess people’s feedback and stay aware of any patterns in what they say; be sure to update your project accordingly.

Crises Management
However well you may have planned your campaign, certain unexpected scenarios may still occur in every single project. In the case of such an emergency, keep calm. Stay cool and think of alternatives; or, better still, find a solution. Further advice can be pursued from the team of professionals who advised you at pre-campaign stage.


Whether your campaign was a success or failure, this is not the end for your project. If your campaign was successful, you should make sure that each backer receives the rewards they were promised in the time specified on the crowdfunding page. You should also keep in touch with backers via newsletters and updates, whilst maintaining your social media profiles.
In the case of a failed campaign, don’t give up. As long as you keep your ‘vision’ in sight and remain flexible in the method to achieving it, you can get there. You should also stay in touch with your backers and supporters since they were there when you needed them.

Crowdfunding Dos and Don’ts

Now that you’re freshly equipped with everything you need to know about campaigning, you are ready to take the final step towards crowdfunding for your project. However, you may find this list of Dos and Don’ts helpful when it comes to keeping you in check.


  • Gain interest and exposure early
  • Maintain a planned schedule for updates
  • Keep the campaign short
  • Establish a fanbase or followership
  • Engage with your audience
  • Listen and adapt to feedback
  • Analyse patterns in comments
  • Keep people up-to-date
  • Edit your idea to suit what’s trending
  • Look for useful contacts
  • Keep your tone friendly and relatable
  • Proofread your description and newsletters
  • Build your image
  • Immerse your audience
  • Be convincing
  • Generate a portfolio with professional photography
  • Update your campaign with new information
  • Set realistic expectations.


  • Neglect social media
  • Be greedy
  • Consider funds as ‘free money’
  • Keep supporters in the dark
  • Release your ideas unprotected (unpatented)
  • Offer too many options, in terms of rewards
  • Worry or panic if you haven’t reached your goal.

Budgeting and Forecasting

Warren Buffet, one of the most successful investors in the world states that ‘Risk comes from not knowing what you are doing’. In business it is imperative to plan ahead, whether you are just starting out, contemplating growth or seeking outside help.

A business plan (see Chapter 01), be it a formal one prepared with the assistance of professional consultants or an informal one, is useful to set out your goals, processes, budgets and marketing plans.  

An integral part of the business plan is the budget or forecast through which you will quantify your expectations, in other words what you believe your business will accomplish.  It will include a detailed representation of the future results, financial position and cash flows which you expect your business to achieve during a particular period of time. 

Budgets may need to be revised periodically especially if there are changes in market circumstances rendering the original targets unachievable.  Over time actual results are compared to the budgets and inevitably there will be variances which may be both positive and negative.  Variances are investigated and remedial action taken if necessary.

 Different budgets may be created to account for diverse situations such as a best or worst case scenario.

Potential equity partners or lending institutions will request budgets or forecasts to assess the business’ financing requirements, future profitability hence prospective returns and repayment feasibility.

Factors for success vs. potential pitfalls

Success is primarily quantified by the value of profits registered, although at the end of the day, the actual measure of success is the net cash that remains in the pockets of the enterprise or its promoters.

All businesses operate differently, however, there are certain common characteristics which one identifies with success.

First and foremost the business needs to be established with an adequate capital base which represents the promoters’ stake in the company.  It is important to achieve a good balance between debt and equity.  Re-investing at least part of the annual profits in the company also ensures the build-up of a cushion for less favourable times.

The second important element is management, in other words the people who run the business. 

Effective management takes measured decisions, plans ahead, sets out objectives and identifies the right strategy to reach the target goals.

A successful enterprise offers a product or service which is in demand by the market and manages to attain a competitive edge over other parties operating in the same industry.

Costs, especially those of a fixed nature, are to be contained as much as possible since these will be incurred whether sales are being registered or not.

It is also imperative, for the successful company to employ people with the required skills and invest in their development through continuous training.

On the other hand, one needs to be aware of the following common pitfalls:

  1. In small enterprises or family run businesses, it is common not to distinguish between personal and business matters.
  2. Succession can be an issue especially when the founding member/s are very much involved in the business.
  3. Overtrading is another common occurrence where a company expands in a rapid manner without ensuring proper funding.
  4. Barter is a pitfall which impacts negatively the company’s cash flow.
  5. Undertaking large contracts when the necessary resources be they equipment, manpower, or finance are not available.