Europe's Defense Startups Face Uphill Battle to Access Credit Amid Banking Curbs

As of November 10, 2025, Europe's defense technology startups are struggling to access credit from the region's major banks, even as many lenders have relaxed restrictions on lending to the sector. A study by the Nato Innovation Fund has found that almost 10% of the 75 largest European banks by assets and market value still have policies restricting financing for conventional weapons and startups involved in developing technologies with both military and civilian applications.

Some prominent exceptions remain, with HSBC and banking startup Revolut continuing to enforce strict exclusions on arms producers and dual-use technologies. This is despite a broader trend of lenders, including BNP Paribas and Danske Bank, becoming more vocal in their support for the defense industry.

The financing barriers are posing challenges for Europe's rapidly growing defense tech startup sector, as well as smaller manufacturers, who rely on banks for credit and general banking services. The issue is compounded by perceptions within the financial industry that the defense sector may not align with environmental, social, and governance (ESG) considerations.

As a result, some affected companies, such as Portugal-based drone maker Tekever, have been dropped as clients by banks like Revolut. The situation has forced some startups to look to the US market, where JPMorgan Chase recently pledged to facilitate and finance $1.5 trillion in strategic sectors including defense over the next decade.

To address the financing barriers, proposals for a multilateral Defense, Security and Resilience Bank aim to offer state-backed guarantees to reduce risk for commercial lenders. The European Investment Bank has also tripled its defense-related SME financing to €3 billion. However, experts warn that if the issues persist, more companies may choose to operate where access to credit is easier - and that could mean the United States.