As the space economy continues to expand at record speeds, with more assets being put in orbits and on celestial bodies than ever before, one challenge which the industry is facing, and which policymakers need to address, relates to the availability of affordable lines of finance and credit.
Presently, most newcomers in the space sector are supported by venture capital, angel investors, billionaire founders, and/or government-backed grants, with only a handful accessing more sustainable and longer-term forms of finance which are not tied to equity, such as project financing, bank financing, or various forms of secured lending.
Credit, at an affordable rate, is key for healthy and sustainable businesses to exist, especially for small and medium sized enterprises (SMEs) from developing and emerging space economies. In order for the commercial space sector to grow and be fuelled by private capital, governments need to take enabling actions to create a legal and regulatory environment that facilitates access to credit and finance for space companies.
This can be done by developing and implementing legal instruments that are designed with the needs and intricacies of the space sector in mind. In fact, the Council of the European Union, in its recent ‘Key principles for the global space economy’ released in November 2020, specifically stressed focussing on promoting access to finance and funding opportunities for SMEs in the space sector, also with a focus on already existing international financial instruments.
In order to resolve the financing gap in the space sector, financing solutions such as export credits, asset-based financing, factoring, supply chain finance, and solutions other than equity need to be explored. This will allow more SMEs to secure pre-funding of launch costs and costs related to the development of their space technologies. The European Investment Bank, in a recent report, identified access to finance as a critical challenge for the space sector to tackle, and that the finance gap must be resolved to allow the industry to thrive.
In order to do this, lawmakers, policymakers, as well as legislators must play their part in actively working towards ensuring that the space economy fits in well with the more holistic economic activities of the world, and that there is a smooth inflow of capital in order to allow the space sector to continue to grow.