SBA, War Department Sign Landmark Deal Expanding Defense Base Funding

The Small Business Administration (SBA) and the Department of War (DOW) have signed an agreement to improve access to capital for small businesses operating in the defense sector.

Specifically, the DOW Economic Defense Unit will identify defense-related companies in need of financing and refer them to the SBA as potential loan candidates. The SBA will use its 7(a) and 504 business loan program networks to connect companies with capital backed by the agency, the SBA said in an Oct. 12 statement.

The move is part of the Smaller War Plants Commission (SWPC), recently established by the SBA and DOW, which aims to expand domestic capacity to support the U.S. military through a whole-of-government effort.

“When we established the Smaller War Plants Commission, we committed to putting the full weight of the federal government behind the small manufacturers that comprise 70 percent of America’s defense industrial base,” SBA Administrator Kelly Loeffler said in the statement.

“Together with the Department of War, we are delivering on that promise by supercharging the flow of strategic capital to American defense suppliers to accelerate growth, innovation, and asymmetric advantage for our warfighters.”

Loeffler commended President Donald Trump for ending foreign dependence and rebuilding domestic defense industrial strength.

In addition to enabling defense companies’ access to loans, the agreement also paves the way for the DOW to potentially make equity investments deemed critical for national security.

Secretary of War Pete Hegseth said the SWPC will now be able to allocate capital to small businesses building munitions, microelectronics, components, materials, ships, and other technologies.

In recent months, the DOW has made multiple announcements about making investments to secure the material supply chain critical to the defense industry, fund new technologies, and acquire weapons.

On Aug. 31, the DOW announced an estimated $174 million investment to secure the gallium supply chain, an element critical to high-performance semiconductors and used in advanced radars for aerial platforms, ground-based missile defense systems, secure satellite communications, and sensors for missile guidance.

The element is also used in the manufacture of solar cells powering satellites.

The investment “will secure a vital supply of gallium for our defense industrial base, strengthening our collective security and economic resilience for years to come,” Michael Cadenazzi, assistant secretary of war for industrial base policy, said in the statement.

Next-Gen Weapons

In terms of cutting-edge technology, the DOW said this month it would fund $350 million for various quantum computing initiatives.

The department expects quantum applications in fields such as chemistry, physics, and materials science to help develop more lethal next-gen weapons and other military capabilities cost-effectively.

The DOW will seek to identify mission-relevant applications of the technology, especially as quantum computers become more widely available.

As for weapons acquisitions, the DOW announced on Oct. 8 that it was awarding a contract worth up to $6.3 billion to Raytheon for manufacturing SM-3 interceptors used to destroy ballistic missiles.

“This contract provides production certainty to our defense industrial base, breaks sub-tier manufacturing bottlenecks, and ensures that our fleets and combatant commands have the interceptors required to dominate the battle space—air, sea or land,” Undersecretary of War for Acquisition and Sustainment Michael P. Duffey said in the statement.