Ukraine's Soft Loan Program delivered UAH 5 billion ($119 million) to 80 defense industry enterprises during its first year of operation, the Ministry of Defence announced on 12 November. On top of that, the ministry approved an additional 16 loan applications worth nearly UAH 700 million ($17 million), while 52 applications totaling over UAH 4 billion ($95 million) remain under review.
This financing is significant because it addresses a fundamental challenge for Ukraine's defense transformation: manufacturers need capital to transition from prototype development to mass production to meet immediate frontline demands.
How the Soft Loan Program works
The program offers manufacturers two financing options:
- Working capital loans: Up to UAH 100 million ($2.4 million) for three-year terms.
- Investment project loans: Up to UAH 500 million ($11.9 million) for five-year terms.
Defense enterprises pay 5% interest while the state covers the remaining percentage. Companies can apply through five partner banks that meet security requirements. The Ministry of Defence implements the program alongside the Ministry of Finance, the Business Development Fund, and participating Ukrainian banks.
"Safeguarding the workforce of defense industry enterprises is a matter of national security. Many key production facilities continue to operate under extremely difficult conditions to ensure that the army receives modern weapons and equipment on time. We are enhancing the conditions to ensure their continuous operations," stressed Deputy Minister of Defence of Ukraine Anna Gvozdiar.
Bridging the gap from prototype to production
Loan recipients use funds for production modernization, equipment acquisition, manufacturing expansion, and serial production development. The structure reflects a broader pattern in Ukrainian defense financing: companies build battlefield-tested prototypes and secure military contracts, but then need capital to scale.
While Ukrainian defense manufacturers can produce $35 billion worth of equipment annually, the loan program addresses the gap between this technical capability and the actual production volume. Companies often demonstrate successful designs but lack the working capital to purchase components, hire workers, and expand facilities to meet demand.
The loan program complements direct government procurement. For instance, Ukraine's Defence Procurement Agency paid UAH 104.2 billion ($2.5 billion) to 76 drone manufacturers during 2024-2025, demonstrating how rapid scaling responds to battlefield requirements. Manufacturers need both contracts and capital—procurement orders create the demand, while these soft loans provide the financing to fulfill those orders at scale.
