SHELTONS INTERNATIONAL GROUP
One of the common misconceptions in public funding in Malta is that grant approval automatically solves the financing challenge. In practice, approval may confirm that a project has been accepted for support, but it does not provide the immediate cash required to deliver it.
This distinction is important. Many grant-funded projects require businesses to cover operating costs upfront and complete a claim or reimbursement process before receiving the approved funding. Although the grant reduces the investment’s final net cost, the business must still manage the cash-flow impact during implementation.
For this reason, financial planning should be considered at the same time as grant eligibility. The question is not only whether a project can qualify for support. It is whether the business can fund the project properly until the grant benefit is realised.
The discussion that follows explains the timing gap between approval and reimbursement, the role of co-financing and bridge finance, the project’s true cash requirement, and the documentation needed to support timely claims.
The Timing Gap Between Grant Approval and Cash Recovery
A grant award is an important milestone, but it should not be treated as available cash.
Depending on the scheme, a company may need to fund supplier deposits, staged payments, equipment purchases, software implementation, consultancy fees, recruitment costs, or other project-related expenditure before any support is received.
This creates a timing gap between approval, expenditure, claim submission, review and reimbursement.
For SMEs and growing businesses, this gap can be crucial. Cash may already be committed to payroll, stock, rent, tax obligations, marketing, product development, or other operating requirements. If the timing of grant recovery is not planned properly, an approved project can place pressure on the wider business.
A grant-funded investment should therefore be reviewed on a gross cash basis, not only on a net-of-grant basis. This helps management to understand the full project cost, the timing of each payment and the point at which funding is realistically expected to be received.
Co-Financing: How Businesses Are Expected to Contribute
Most public funding measures are designed to part-finance a project. The business is usually expected to contribute part of the investment through its own resources or through an appropriate financing structure.
This contribution is commonly referred to as co-financing.
The source of co-financing will depend on the relevant scheme, the size of the project, and the applicant’s financial position. It may include available cash, retained earnings, shareholder funding, bank finance, approved credit facilities, or other documented financing arrangements accepted within the relevant scheme framework.
What matters is that the funding source is credible, documented, and available when required. Management should know how much the company must contribute, when that contribution is needed, and whether the proposed funding source is reliable.
Co-financing explains how the business will meet its share of the project cost, while bridge financing addresses the temporary liquidity gap before grant proceeds are received. A robust funding plan may therefore require both.
Bridge Financing: Covering the Period Before Grant Proceeds Arrive
Bridge financing refers to short-term funding used to cover the period between project expenditure and the receipt of grant proceeds or other expected support. It provides temporary liquidity so that the company can continue delivering the project without disrupting day-to-day operations.
Common forms may include short-term bank loans, overdraft facilities, revolving credit lines, shareholder or director loans, agreed supplier credit terms, or guarantee-supported bank finance where available and appropriate.
The suitability of each option depends on the scheme rules, lender requirements, the company’s financial position, and the project timeline. A verbal indication from a bank or an informal shareholder intention may support early discussions, but it should not be treated as committed finance unless it is properly documented.
The practical question is simple: when the business needs to make a payment, will the funds be available?
If the answer is uncertain, the financing plan should be strengthened before major expenditure is committed.
Understanding the True Cash Requirement of a Grant-Funded Project
One of the common mistakes in funded projects is focusing only on the approved grant percentage. This can create an incomplete view of affordability.
Not all project-related costs may be eligible. VAT, ineligible expenditure, financing costs, maintenance charges, timing restrictions, foreign exchange differences, supplier deposits, or changes in scope can all affect the actual amount of cash required.
A project-level cash-flow plan gives management a clear view of the real funding gap by mapping the project’s gross cash requirement, payment schedule, eligible and ineligible costs, co-financing source, bridge-financing arrangements, evidence requirements, and expected reimbursement timeline which helps businesses to use public funding effectively.
Documentation and Claim Readiness: How Records Affect Cash Flow
Cash flow is also affected by the quality of documentation.
Incomplete invoices, missing proof of payment, weak procurement evidence, or records that do not align with the approved scope can delay claim preparation and review. These delays extend the period during which the business must finance the project costs.
Claim readiness should therefore be built into the project from the beginning. Management should understand the evidence requirements before expenditure is incurred and establish a process for collecting the required records throughout implementation.
Good documentation is not only a compliance matter. It is part of cash-flow control which improves visibility over expenditure, reduces avoidable delays, and helps management understand what has been paid, what can be claimed, and what remains outstanding.
Public Funding Works Best With a Solid Financial Plan
Public funding can be a valuable tool for business growth, but approval should not be viewed in isolation. The real value of a grant depends on the business’s ability to fund the project properly, manage reimbursement timing, evidence costs, and maintain sufficient working capital throughout implementation.
Our advisors help businesses translate funding conditions into a practical financial plan by reviewing the project budget, identifying co-financing requirements, assessing timing gaps, reviewing financing evidence, and aligning the claim process with the company’s wider cash-flow position.
At Sheltons, this forms part of our wider approach to helping clients prepare not only for funding approval, but also for delivery. When approached in the right way, public funding becomes more than financial assistance. It becomes part of a structured framework for better planning, stronger governance, and sustainable investment.
