On October 13, 2026, the U.S. Small Business Administration and the U.S. Department of Defense signed a memorandum of agreement to expand access to strategic capital for small businesses in the defense industrial base. The announcement was made by the SBA and the Pentagon on October 13.
What the agreement does
The partnership builds on the Smaller War Plants Commission, a whole-of-government effort established last month to expand domestic manufacturing capacity supporting U.S. military operations. Under the new agreement, the Defense Department's Economic Defense Unit will be aligned with SBA offices focused on lending and investment programs, creating what officials called an integrated capital pathway for qualified small businesses.
The stated goal: help defense-critical manufacturers, suppliers, and innovators gain more capital to grow production, strengthen domestic supply chains, and support military needs — covering everything from ships and munitions to microelectronics and essential materials.
New capital tools, including preferred equity
According to officials, the arrangement also enables SBA support for redeemable preferred-equity investments in critical sectors such as munitions manufacturing or the development of essential materials. That is a notable signal: the SBA is signaling interest in equity-style instruments alongside its traditional lending programs for defense-critical businesses.
70% of the defense industrial base
SBA Administrator Kelly Loeffler said the agreement puts "the full weight of the federal government" behind small manufacturers that make up 70% of America's defense industrial base, and that it will "supercharge the flow of strategic capital to American defense suppliers." The commission's name recalls World War II-era agencies — the Smaller War Plants Corporation and the Small Defense Plants Administration — that connected small manufacturers with financing during wartime production.
What defense-sector borrowers should know
- This is a framework, not a loan program (yet). No specific loan product, interest rate, or application process has been published — program details will come from the SBA and the Defense Department as they are finalized.
- Watch for the rollout. Businesses that supply the defense sector should follow SBA announcements for new lending or investment windows.
- Existing programs still apply. In the meantime, 7(a) and 504 loans remain the standard SBA pathways for manufacturers and suppliers.
This agreement signals Washington's direction: strategic capital is flowing toward defense supply chains. If your business serves that market, positioning early — with clean financials and a clear capital plan — may matter when the new pathways open.