The Department of War and the Small Business Administration (SBA) signed an agreement on Monday, October 12, 2026, to expand capital access for small businesses within the U.S. defense industrial base. The partnership builds upon the Smaller War Plants Commission (SWPC), an initiative announced in August 2026 to strengthen domestic supply chains and manufacturing capacity for national security.
The agreement integrates the Pentagon’s Economic Defense Unit (EDU) with the SBA’s Office of Investment and Innovation and Office of Capital Access. Under this framework, the EDU will identify companies with financing needs and refer them to the SBA, which will utilize its lender networks to connect those firms with SBA-backed funds. The effort focuses on small and medium-sized businesses involved in producing munitions, microelectronics, strategic minerals, and shipbuilding components.
According to SBA Administrator Kelly Loeffler, small manufacturers currently comprise 70% of the U.S. defense industrial base. The new commission is modeled after the Smaller War Plants Corporation, a 1940s-era entity that provided loans and technical assistance to small businesses during World War II. Secretary of War Pete Hegseth stated the agreement aims to secure domestic production of technologies that military personnel rely on, including sensors, batteries, and textiles.
For a typical small manufacturing firm, this change could mean lower barriers to securing financing for facility modernization, equipment purchases, and inventory expansion. The scale of the initiative is intended to reach the thousands of companies that make up the 70% of the defense industrial base, though the specific number of firms expected to receive loans was not reported. The program seeks to address production bottlenecks in critical sectors like drone systems, castings, and forgings by providing targeted capital that might otherwise be unavailable through private lenders alone.
The knock-on effects include the creation of a Civil Reserve Manufacturing Network (CRMN) to map supply-chain gaps and the deployment of joint teams to identify and remove regulatory barriers. This sets a precedent for direct inter-agency collaboration between the SBA and the Department of War to influence industrial capacity. What happens next involves the commission delivering regular reports to the President regarding industrial strength and supply-chain readiness. While the agreement is effective immediately as of October 12, 2026, specific deadlines for the first set of regular reports were not disclosed.