DOD’s Office of Strategic Capital accepting loan applications as it looks to lend up to $984M

Companies can now start applying for direct loans from the Defense Department’s Office of Strategic Capital, which is looking to disperse up to nearly $1 billion to finance equipment via its new credit program.

The opening of the application window on Thursday coincided with the unveiling of the organization’s fiscal 2025 investment strategy.

“The OSC Credit Program assesses capital market needs and develops financial instruments to encourage private investment in industries that are both commercially viable and necessary for the geopolitical challenges of the 21st century. The Credit Program employs loans and loan guarantees as an enticement for private capital to invest in potentially overlooked segments of the market that support the development of critical technologies and ensure the availability of vital components. Where private capital alone may require higher interest rates or comparably rapid repayment, the Credit Program can offer competitive rates with substantially longer repayment timelines, thereby providing companies the time and space they need to move new products to market,” officials wrote in the strategy.

The Pentagon created OSC in December 2022. About a year later, Congress formally enacted the office into law through the fiscal 2024 National Defense Authorization Act and gave it new authorities to issue loans and loan guarantees to eligible companies working on covered critical technology categories that were laid out in the NDAA, such as autonomous mobile robots. In March 2024, appropriators gave OSC funding for these efforts.

Up to $984 million is available for direct loans, which are expected to range from $10 million to $150 million, according to a notice of funding availability published in September in the Federal Register. Eligible financing activities include capital investment in property, plant and equipment, including acquisition and installation of equipment and certain “associated soft costs,” according to the Pentagon.

The 31 covered critical technology categories include advanced bulk materials, advanced manufacturing, autonomous mobile robots, battery storage, biochemicals, bioenergetics, biomass, cybersecurity, data fabric, decision science, edge computing, external communication, hydrogen generation and storage, mesh networks, and microelectronics assembly, testing and packaging.

They also include microelectronics design and development; microelectronics fabrication; microelectronics manufacturing equipment; microelectronics materials; nanomaterials and metamaterials; open RAN; optical communications; sensor hardware; solar; space launch; spacecraft; space-enabled services and equipment; synthetic biology; quantum computing; quantum security; and quantum sensing.

Among those, industry segments “of particular interest” this year include advanced bulk materials; advanced manufacturing; autonomous mobile robots; battery storage; biochemicals; bioenergetic, biomass; hydrogen generation and storage; microelectronics assembly, testing and packaging; microelectronics manufacturing equipment; microelectronics materials; nanomaterials and metamaterials; sensor hardware; spacecraft; and synthetic biology, according to OSC’s fiscal 2025 investment strategy.

“With the Investment Strategy as a guide, OSC investments will help reduce vulnerabilities to economic chokepoints, support the production of key industrial capabilities, and lead the development of next generation critical technologies,” Undersecretary of Defense for Research and Engineering Heidi Shyu said in a statement.

The equipment finance offering will involve a multi-phase process including project selection, project underwriting and project monitoring.

For part one of the application process, companies will be expected to provide information that OSC will use to determine eligibility, creditworthiness and alignment with the office’s policy priorities.

“Based on these reviews, OSC selects projects which it intends to fund. OSC proposes preliminary indicative terms and conditions for the project and invites them to continue through the application process,” according to a Pentagon website about the initiative.

The application window that opened Thursday will close Feb. 3.

“OSC expects to continue to respond to market demand by offering more complex forms of Financial Products directly and by partnering with lenders in 2025 and beyond,” officials wrote in the investment strategy.