OSC launches $1 billion loan program to strengthen industrial base

The Pentagon will provide nearly $1 billion in loans to U.S.-based companies in an effort to boost production of critical technologies. 

The Office of Strategic Capital issued its first notice of funding availability, laying out eligibility criteria and opening up the application process to companies seeking loans to scale production of critical technologies. 

The direct loans, ranging from $10 million to $150 million, will support the development of facilities producing technologies across 31 covered technology categories that are considered vital to national and economic security, including microelectronics, advanced manufacturing, synthetic biology, edge computing, space launch, and quantum computing.

“With this Notice of Funding Availability, OSC establishes itself as a credible lending partner for U.S.-based companies that manufacture and produce critical technology components,” Deputy Secretary of Defense Kathleen Hicks said in a statement.

The OSC opened its doors in December 2022 with a goal of providing loans and loan guarantees to businesses working on innovative technologies — it works with private equity firms and the rest of the DoD, including the Defense Innovation Unit, to bring in private capital to adopt new technologies quicker.

The fiscal 2024 defense policy bill helped the department specify the technologies that can receive OSC funding — the technology categories laid out in the bill are complementary to the 14 critical areas identified by the department. 

According to the OSC, applicants can use the loans to finance the purchase, refurbishment or installation of equipment that supports the production of these critical technologies. Applicants seeking loans through the OSC are not required to have any history of working with the DoD. 

Eligible applicants, which include corporations, partnerships, individuals, trusts, and consortiums, will follow a two-part application process — application submissions are due by Feb. 3rd.

“Following this initial phase, selected applicants will be invited to submit application part 2 for further evaluation,” the notice of funding availability reads. 

As of now, the notice of funding availability is limited to direct loans, but the OSC anticipates expanding its support and possibly adding other forms of financial assistance, including loan guarantees, which is contingent on future funding from Congress. Funding for the program will be available through 2026.

“Through these congressional authorities and appropriations, the DoD now has proven financial tools to enable millions of dollars of investment in national security priorities at limited cost to the Department and the taxpayer,” OSC Director Jason Rathje said.

“OSC’s implementation of its congressional mandate will ultimately increase both public and private investment to secure a robust and resilient U.S. industrial base.”

The OSC released its first investment strategy in March — the document focuses on strategic capital needs where public support is needed to bring private investment into the Defense Department.

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