WASHINGTON — A Pentagon office created to drive private capital toward national security needs is partnering with the Small Business Administration to offer federally guaranteed loans for investors looking to fund defense-related technologies.
The Office of Strategic Capital announced the rollout of the Small Business Investment Company Critical Technology initiative Sept. 29 and has started taking applications.
“Applications are now being accepted and evaluated by the SBA’s Office of Investment and Innovation with support from OSC,” Lt. Cmdr. Tim Gorman told C4ISRNET in an Oct. 3 email. “The program expects to issue its first licenses in 2024.”
The Pentagon and SBA announced the partnership last December and have been working to flesh out the details since then.
The effort is focused on the 14 emerging technologies the department has identified as critical to national security, which includes areas like AI, space, quantum, integrated networks and advanced materials. By partnering with the Small Business Administration, the Pentagon hopes to take advantage of the organization’s experience directing venture capital funding toward high-need areas, Defense Secretary Lloyd Austin said in a Sept. 29 statement.
“To maintain our competitive advantage, the United States must continue to harness its unmatched strengths — its private capital markets, national security supplier base, and vibrant technological ecosystem,” Austin said. “In alignment with the National Defense Strategy, the SBICCT Initiative will further enable DoD to work with both government and the private sector to build enduring advantages for the warfighter and for the taxpayer.”
While lending tools like SBICCT are new to Pentagon, federal agencies like the Commerce Department and the Energy Department have a long history of using credit programs to support key industries like microelectronics and renewable energy. According to OSC Director Jason Rathje, loan agreements can be more efficient than traditional DoD spending practices because they assume a return on investment.
“Loans as a tool are extremely efficient,” Rathje said Sept. 6 at the Defense News conference in Arlington, Virginia. “If you think about the defense budget . . . we say investment, but we spend money. There’s no expectation that money is going to come back to the U.S. government or back to the DoD. But loan programs are different.”
As OSC moves forward with the SBICCT effort, it’s evaluating which of the department’s critical technologies might benefit the most from a loan guarantee effort. Rathje said areas like AI, autonomy and microelectronics that have a broader commercial ecosystem are high on the list.
“We’re looking at key industries . . . we’re looking at capital availability, we’re seeing where can OSC tools make a difference in increasing funding to companies that are developing technologies,” he said.
That work will also inform a broader OSC investment strategy, which Rathje said will be finalized in the coming months. Once completed, the office’s strategic advisory council — co-chaired by the undersecretaries of research and engineering and acquisition and sustainment — will consider how those technologies are being integrated into other DoD planning processes.
Courtney Albon is C4ISRNET’s space and emerging technology reporter. She has covered the U.S. military since 2012, with a focus on the Air Force and Space Force. She has reported on some of the Defense Department’s most significant acquisition, budget and policy challenges.