There is a contradiction at the heart of Europe’s new space-finance policy: we keep looking for banks willing to lend to companies that first need shareholders willing to take industrial risk.
The new European Investment Bank and Deutsche Bank partnership, designed to support EUR 560 million in investment across the European space supply chain, is welcome news. It promises access to longer-term credit, more flexible financing structures and banks better equipped to work with complex industrial businesses. Above all, it treats space for what it is: an industry, not simply a technology laboratory.
But the question needs to be moved one step further upstream.
Before asking how much a European space company can borrow, we should ask how much equity it has, how much risk it can absorb and who will finance its growth before it becomes comfortably bankable.
Europe’s real problem, then, is not just a funding gap.
It is a bankability gap.
The European bankability gap
Many European space businesses occupy an uncomfortable financial middle ground.
They are too mature to be treated as ordinary start-ups: they have qualified products, customers, factories, highly specialised staff, order books and, in some cases, positive EBITDA.
Yet they are still too small, too dependent on a handful of programmes or too capital-intensive to finance a genuine leap in scale on their own.
For venture capital, many are already “old”.
For large private equity funds, they are still too small.
For a bank, they may be attractive, but only within limits consistent with their balance sheets, cash flows and the predictability of revenue.
That is the bankability gap. The problem is not necessarily that the company is weak. It is that the company lacks the capital structure needed to use debt without allowing debt to dictate its industrial future.
A European space-electronics manufacturer might generate EUR 40 million or EUR 50 million in revenue, have a growing order book and supply highly respected customers, yet need to fund production lines, certifications, recruitment, working capital and acquisitions long before the cash arrives.
An Earth-observation operator, a satellite-component producer and a supplier to launcher manufacturers face different risks. These are not interchangeable markets.
But they often share one constraint: growth consumes capital before it produces cash.
Banks lend against the ability to repay.
Equity investors finance the growth that must come first to make repayment possible.
We protect the lender. But who builds the shareholder base?
Over the years, Europe has assembled a sophisticated financial toolkit: guarantees, risk-sharing arrangements, venture debt, long-term funding, EIB and EIF instruments, start-up programmes and initiatives for scale-ups.
That infrastructure matters.
Yet a paradox remains.
We are remarkably organised when it comes to reducing the risk borne by lenders. We are considerably less organised when it comes to mobilising investors willing to bear the risk of owning an industrial company.
A guarantee can facilitate a loan. It can reduce its cost, extend its maturity or allow a bank to take a risk it would otherwise reject.
But it does not automatically add equity to the company’s balance sheet.
The loan remains a liability.
Interest remains interest.
And principal still has to be repaid.
Equity is not inherently “better” than debt. It is more expensive, dilutes existing shareholders and comes with governance rights, investor expectations and return targets.
But it performs a function that credit cannot: it absorbs industrial risk.
That is precisely what many European companies need as they move from excellent technology to genuine industrial scale.
Equity first, debt second
The answer is not to replace banks with investment funds.
It is to build adequately capitalised companies so that banks can finance them more effectively.
Consider a purely illustrative European space-components SME with EUR 45 million in revenue, EUR 6 million in EBITDA and a solid customer base.
It needs EUR 25 million to expand manufacturing capacity and another EUR 15 million to acquire a European competitor that would complete its product range.
Funding the entire EUR 40 million with new debt could turn a sound industrial opportunity into a dangerously inflexible financial structure.
EUR 20 million in new equity alongside EUR 20 million of debt could instead create a larger, more diversified company and, paradoxically, one that is more attractive to banks.
There is no universal ratio.
There is, however, a principle.
Equity should support the part of the plan that carries real industrial risk.
Debt should prudently finance the portion of growth supported by sufficiently predictable cash generation.
This is not debt versus equity.
It is equity so that debt can do its job.
The missing piece is industrial growth capital
For years, the European debate about financing space has rightly focused on start-ups.
Venture capital supports technology, product development, experimentation and early commercialisation when risk is high and cash generation is distant.
But industrial policy cannot stop at Series A.
The critical transition comes when a company must stop being merely a technological promise and become an industrial business: factories, supply chains, acquisitions, international management, quality systems, working capital and a commercial presence across several countries.
At that stage, start-up capital is not enough.
What is needed is growth capital.
And in strategic sectors, there is a case for something we might call sovereignty capital.
Because the task is not simply to finance innovation.
It is to finance ownership of innovation.
If technology is developed in Europe through universities, space agencies, public programmes, national incentives and European seed capital, yet the company must be sold precisely when it reaches scale-up because sufficient European capital is unavailable, it is hard to call the full outcome an industrial-policy success.
The technology might even remain physically in Europe.
But governance, strategy, intellectual property and decisions about its future may move elsewhere.
In the Space Economy, sovereignty also runs through the cap table.
Sector-focused private equity can help close the gap
This is the segment in which specialised private equity funds could make a contribution still far below its potential in Europe.
We need more than funds prepared to bet on start-ups.
We need managers capable of investing in SMEs with revenues, margins, customers and technology, providing capital for expansion, funding acquisitions, consolidating fragmented supply chains and building larger industrial operators.
A sector specialist’s value is not the word “space” on the cover of a pitch deck.
It is the ability to assess technical qualifications, dependence on a programme, customer concentration, capital expenditure, potential acquisitions and the probability that a product can be sold across multiple markets.
Of course, private equity can get it wrong as well.
There would be little sense in importing the most aggressive version of leveraged buyouts into the space industry: buying a company, loading it with debt and cutting investment to maximise financial returns would merely recreate the problem under a different label.
What the sector needs is prudent leverage, reserves for follow-on investment, governance and a credible industrial strategy.
The fund must generate returns. It is not a charitable foundation.
But the pursuit of returns, when paired with genuine sector expertise, can impose industrial discipline without reducing investment to a subsidy.
Not all equity is the same
Calling for “more equity” is not enough.
We must also ask what kind of equity.
Buying shares from an existing shareholder can be invaluable for a succession, a governance transition or a new chapter in a company’s life. But in that case the proceeds go to the seller.
A primary capital increase places new resources directly into the company.
A European scale-up policy should therefore measure not only how much capital is mobilised, but how much actually supports new production capacity, industrial acquisitions, applied research, internationalisation and working capital.
This is not a moral distinction.
It is an economic one.
And it goes straight to the quality of industrial policy.
Public investors should build the market, not pick every company
The answer is not necessarily to create yet another large public fund tasked with choosing directly which space companies deserve capital.
There is potentially a more effective route.
Public and institutional investors can become anchor investors in specialised private funds that are large enough to attract pension funds, insurers, family offices and international investors in their turn.
The manager selects the companies.
The manager invests.
The manager is accountable for the results.
Public capital, rather than replacing the market, helps build it.
The sequence could be surprisingly straightforward: specialist funds strengthen the balance sheets of SMEs; the EIB and commercial banks finance investment and working capital on a more robust foundation; companies use both instruments to add capacity, acquire competitors and expand internationally.
Credit does not disappear.
It becomes more effective.
Without demand, equity is not enough either
Of course, equity is not a magic wand.
A business does not become investable simply because it operates in space.
It needs technology, a market, capable management, the prospect of sustainable margins and, above all, customers willing to pay.
This is where European industrial policy must address the other side of the balance sheet: demand.
Predictable public contracts, faster procurement, payment schedules aligned with work performed and multi-year programmes reduce risk for everyone.
For the fund providing equity.
For the bank extending credit.
For the entrepreneur deciding whether to build a new production line.
Private capital cannot be expected indefinitely to compensate for intermittent procurement, administrative delays or industrial programmes with insufficient forward visibility.
A credible European architecture for space finance therefore needs three pillars: equity to absorb industrial risk, credit to accelerate sustainable investment, and public demand to make revenues more predictable.
Europe still needs an ownership policy
The EIB-Deutsche Bank partnership should therefore be welcomed.
The EUR 560 million of investment it aims to support could help expand companies, production capacity and supply chains. Space TechEU may also help European banks become more familiar with financing an industry that has long been regarded as excessively specialised.
But the strategic question begins precisely where the press release ends.
Who will provide the equity that makes more companies strong enough to use this credit?
Who will support a European SME as it moves from EUR 40 million to EUR 150 million in revenue?
Who will fund the acquisitions needed to consolidate an industry that remains highly fragmented?
Who will prevent technologically outstanding businesses from having to look outside Europe for the money required to reach the next scale?
These are financial questions.
But they have become questions of industrial policy as well.
Europe has become increasingly good at financing the debt of its space companies.
The next step is to learn how to finance their ownership.
Credit is indispensable once a company is ready to receive it.
The real work starts earlier: building sufficiently capitalised, appropriately scaled and well-governed businesses capable of turning that credit into growth.
And ultimately, industrial sovereignty does not belong to the party that extends the loan.
It belongs to those who own and govern the company.
Further reading and context
The EIB-Deutsche Bank partnership
Announced by the EIB on 29 October 2026, the agreement aims to support EUR 560 million in new investment across Europe’s space supply chain. Its scope is pan-European, with roughly half of the investment expected in Germany. It forms part of Space TechEU, the EIB programme that seeks to mobilise an estimated EUR 1.4 billion in cooperation with commercial banks. The EUR 560 million is an investment amount to be supported, not necessarily the face value of a single direct EIB loan.
Existing financial instruments
The EIB Group already provides more than conventional lending: direct loans, venture debt, equity investments and advisory services are part of its toolkit, while the EIF helps mobilise private capital through specialised funds. The challenge is not to invent European equity from scratch, but to expand its scale, sector focus and ability to accompany companies through industrial growth.
From venture capital to scale-up
The most difficult gap often appears after an enterprise has moved beyond its initial stage but needs to fund capital expenditure, acquisitions, international expansion and consolidation. It is here that the bankability gap is most visible, and where sector-focused private equity can complement venture capital and bank lending.
Debt, equity and demand
These are complementary instruments rather than substitutes. Equity absorbs industrial risk; debt broadens investment capacity where future cash flows are sufficiently predictable; and public demand reduces revenue uncertainty. Europe’s industrial-policy success will increasingly depend on making all three work together.