Financing the next generation of the defence industry, Future Defence Fund
Tailored debt financing solutions for young, high-growth and established companies whose business model contributes to Europe’s security and defence capabilities.
Your benefits
Tailored
Financing solutions designed to fit your needs
Attractive
More cost-effective and straightforward financing compared with equity
Flexible
Easier access1 to financing compared with traditional bank lending
Key facts at a glance
A closer look at the Future Defence Fund
As a finance provider, Commerzbank has partnered with companies in the defence and armaments industry for many years. With the Future Defence Fund, it now offers an additional, newly structured lending solution for growing, innovative companies in the defence and armaments industry.
A prerequisite is a business model with a clear technology and market profile, existing cashflows and customer relationships, as well as a certain degree of professional maturity – for example, evidenced by robust financial planning and meaningful reporting. We provide these loans on the basis of an enhanced risk assessment, clearly defined collateral and close, ongoing monitoring.
With this offering, we are strengthening the European defence industry while strictly complying with our armaments policy and all legal requirements.
Additional requirements for financing under the Future Defence Fund
The following requirements and distinctions also apply in particular:
- Throughout the entire term, the company must demonstrate sufficiently strong cashflow overall to repay the financing.
- Companies must have professional financial reporting in place, including regular reports, and be able to comply with agreed financial covenants as well as selected non-financial covenants.
- Traditional project finance arrangements will continue to be handled through the Bank’s separate credit processes and are not part of the Future Defence Fund.
The offer is not aimed at young, traditional start-ups without established structures, nor at established companies that merely intend to build a new ancillary business in the defence sector.
Even if you do not currently meet all the requirements of the Future Defence Fund, please nstill contact your Commerzbank Corporate Clients relationship manager – also to discuss other potential challenges in developing and expanding your business.
„In the defence sector, we support the SMEs of today and tomorrow in their transformation, innovation and growth: Innovative defence scale-ups and defence-related SMEs make a vital contribution to the security of Germany and Europe – in line with our armaments policy.“
Divisional Head Financial Engineering, Commerzbank
What else would you like to know?, FAQ on Commerzbank’s Future Defence Fund
Commerzbank’s Future Defence Fund is a lending offering for emerging, innovative companies in the defence sector. It provides earlier access to debt capital and offers financing for major investment steps, scaling, international expansion and ongoing working capital requirements. The offering provides an additional financing option that enables growth without diluting the ownership structure.
The offering is aimed at established, growing and innovative companies in the defence and armaments sector, in particular scale-ups, as well as medium-sized enterprises that intend to generate more than half of their revenue from defence in future.
In principle, the Future Defence Fund is aimed at companies headquartered in the European Union, the United Kingdom, Switzerland or Norway, with existing or planned substantive business activities in the DACH region.
Commerzbank generally provides loans from the Future Defence Fund in the range of €5 million to €25 million. By combining the financing with public funding and programmes, such as the Venture Tech Growth Financing programme offered by KfW, the German promotional and development bank, significantly higher overall volumes may be achieved in individual cases.
The Future Defence Fund can be used for major investment steps, expanding production, scaling new technologies, international expansion, guarantees, aval facilities, working capital requirements, and financing upfront costs and long payment terms.
A viable business model with clear technology, a recognisable market profile and existing customer and supplier relationships are required. Over the term of the financing, the company must be expected to generate sufficient overall cashflow to repay the loans. Periods of low or no cash flow may be taken into account if the financing is structured appropriately; however, financing solely to cover “cash burn” is not permitted.
No. The Future Defence Fund is not designed for traditional start-ups without existing structures or for pure research projects. It targets companies that already have established products, customer relationships, revenues and verifiable cashflows.
With this offering, Commerzbank aims to finance companies for which defence and armaments will be the most important business area in future. The Bank has experience in this field and is continuing to expand its expertise.
In cooperation with KfW’s Venture Tech Growth Financing programme, which forms part of the German government’s Future Fund, additional financing scope may be available. Furthermore, the Future Defence Fund can be combined with public subsidies and programmes, potentially enabling significantly higher overall financing volumes on a case-by-case basis.
No. The Future Defence Fund is a pure debt financing offering. Commerzbank does not invest in the companies’ equity and does not require any ownership interests. This means that shareholder structures are not diluted.
Yes. The financing structure can be designed in such a way that periods of low or no cashflow are possible. However, sufficient cash inflow must be expected over the full term to repay the loan.
Commerzbank expects professional financial reporting with regular reports, at least quarterly and in many cases monthly. In addition, companies should be able to comply with agreed financial and selected non-financial key performance indicators and provide multi-year financial planning.
Commerzbank has been working for some time on new financing options for innovative scale-ups in Germany. The Future Defence Fund builds on earlier products such as ESG future financing and is another specialised lending product for companies with a clear future-oriented profile.
Traditional project finance in the defence sector will continue to be handled through separate credit processes. The Future Defence Fund is aimed at corporate financing, not individual projects.
Financing is available for defence and armaments companies with a clear, viable business model. Commerzbank’s defence policy remains decisive for any financing in this area and, for example, excludes transactions relating to internationally banned weapons.
As many of the companies addressed are in the sub-investment-grade or non-investment-grade segment, interest rates are higher than for traditional corporate loans. However, the overall cost remains significantly below typical market equity costs. In addition, there is no equity participation, meaning that shareholder structures are not diluted.
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In terms of rating, collateral and maturity; higher credit risk, for example due to a shorter track record, longer financing terms or higher technology and market risks, is accepted.