Private Credit Pivot: How Sienna Hephaistos and the EIF Are Solving the Defence SME Liquidity Gap (2025–2026)

While sovereign guarantees and innovation grants reshape the macro landscape, a critical bottleneck remains on the factory floor: liquidity. On 17 September 2025, the European Investment Fund (EIF) fundamentally altered the financing equation for defence supply chains by anchoring the Sienna Hephaistos private credit fund with €30 million. This move signals the rise of a new asset class: non-dilutive private debt specifically structured for dual-use SMEs that are "too strategic to fail" but often too complex for traditional banks. With bank lending still lagging, private credit funds are stepping in to finance working capital, inventory, and M&A for the mid-market. This report dissects the deal mechanics, explains why retail investors are now entering the fray via Bpifrance, and reveals how CFOs can leverage this new capital stack to fund production ramp-ups without selling equity.