On October 12, the Small Business Administration and the Department of War signed a new agreement. It links the Pentagon's investment office to SBA's lenders. The goal, SBA said, is to help small defense manufacturers and suppliers "access more capital to grow production."
The deal is the first working piece of the Smaller War Plants Commission. The two agencies launched the Commission on August 25 to grow the small businesses that make parts and products for the military. SBA's September guidance on 8(a) applications fills in more of the picture. Together, they show which industries the government wants to grow and how the money is meant to reach them.
What the October 12 agreement does
The agreement opens two paths to money.
The first is loans. The Pentagon's Economic Defense Unit will look for small defense suppliers that need financing. It will send likely loan candidates to SBA. SBA will then use its 7(a) and 504 lenders "to help connect eligible firms with SBA-backed capital."
The Economic Defense Unit is new. It was set up in April with a mission "to integrate private capital into military planning and national security strategy," Stars and Stripes reported. It finds businesses through a Pentagon effort called Business Operators for National Defense.
The second path is investment. The Economic Defense Unit can put Pentagon money directly into small and medium-sized businesses. The investment takes the form of redeemable preferred equity: an ownership stake the company is expected to buy back later. It is not a loan. These investments are for businesses that "create, expand, or restore industrial capacity critical to national security." SBA vets the company and the deal. The Pentagon makes the final call.
Secretary of War Pete Hegseth said the Commission will now be able to "surge strategic capital to the small businesses that build the ships, munitions, microelectronics, materials, components, and technologies our warfighters rely on."
Neither agency has said how much money stands behind the agreement. There is also no application to fill out. The loan path starts when the Pentagon finds a business, not when a business files a form.
Where the Commission came from
The name comes from the Smaller War Plants Corporation, a World War II agency that came before SBA. It helped small businesses "secure financing, government contracts, and technical assistance for essential military production," according to SBA.
The new Commission has the same goals. In August, the agencies promised defense-critical industries "enhanced access to SBA lending, capital-investment, contracting, and technical-assistance tools." They also plan to take stock of what small manufacturers can produce. That inventory will feed the Civil Reserve Manufacturing Network, a roster of manufacturers that could support defense production in a national emergency.
The August announcement named nine focus industries:
| Focus Industry | What It Includes |
|---|---|
| Batteries | Power for soldiers, drones, vehicles, and munitions |
| Castings and forgings | Metal casting, forging, machining, heavy fabrication |
| Drones | Motors, airframes, flight controllers, cameras, radios |
| Microelectronics | Chips, chip packaging, printed circuit boards |
| Munitions and their components | Artillery shells, rocket motors, fuzes, casings, machined parts |
| Sensors | Infrared and radar parts, navigation devices |
| Shipbuilding and repair components | Valves, pumps, castings, piping, electrical systems |
| Strategic and critical minerals | Rare earths, lithium, gallium, tungsten, and the mining and refining behind them |
| Textiles | Uniforms, body armor fabric, parachutes, tents |
One loan program was open before the Commission existed. Since May 1, small manufacturers have been able to use SBA's Made in America Loan Guarantee, part of its International Trade Loan program. SBA backs 90 percent of these loans. Its standard 7(a) loan is backed at 75 percent. SBA says the bigger guarantee gives lenders "greater confidence" to lend to manufacturers. The money can pay for equipment, plant and production line upgrades, inventory, or buying another company.
The ten defense-critical NAICS codes
The Commission says it will give ten defense-critical NAICS codes priority for SBA and Pentagon loans, investment, contracting, and grants. It has not published which ten.
SBA has published one list of ten defense-critical codes. It came in SBA's September 10 guidance, issued in support of the Commission. SBA said it will "prioritize reviewing and processing 8(a) applications" from small businesses in these industries:
| NAICS Code | Code Description | Size Limit (Employees) |
|---|---|---|
| 331110 | Iron and steel mills | 1,500 |
| 332710 | Machine shops | 500 |
| 332992 | Small arms ammunition | 1,300 |
| 332993 | Other ammunition | 1,500 |
| 332999 | Other fabricated metal products | 750 |
| 334419 | Other electronic components | 750 |
| 334511 | Navigation and guidance instruments | 1,350 |
| 336413 | Aircraft parts | 1,250 |
| 336414 | Guided missiles and space vehicles | 1,300 |
| 336611 | Ship building and repairing | 1,300 |
The size limit is SBA's current size standard for each code. A business with more employees than that is not small for that code. SBA has proposed new size standards, with comments open until November 20, so these limits could change.
How many businesses list these NAICS codes
On October 19, we searched SBA's Small Business Search (SBS) for each of the ten codes. SBS is SBA's public database of small business profiles, and anyone can search it, including federal buyers. Every business in SBS picks one primary NAICS code and can list others. Each card shows how many businesses list the code as their primary code, how many list it in total, and how many 8(a) certified businesses list it as their primary code. The total counts only businesses that are small for that code.
For nine of the ten codes, more businesses list the code as a secondary code than as their primary one. Machine shops is the exception. Code 332999 is the clearest case: 1,477 businesses list it as their primary code, but 9,590 list it in total. SBA has not said whether the 8(a) fast track looks at a firm's primary code or at any code it lists.
The 8(a) numbers are the smallest. Across all ten codes, 49 businesses with an active 8(a) certification list one as their primary code, and three codes have none. That gap is what the fast track is aimed at.
Machine shops (332710) is the most common primary code on the list, and machine shops make parts to order for any customer. Code 332999 covers metal products that don't fit a more specific code. A job shop that has never sold to the government may already be registered under one of them. That matters because so much defense work happens below the prime contractor, where small shops make parts for larger companies.
What changed for 8(a) applicants
The September 10 guidance also made two changes for individually owned firms applying to the 8(a) program. Both follow SBA's new 8(a) eligibility rule.
First, SBA brought back its "potential for success" review. The review looks at an applicant's financial and business records to judge whether the firm can deliver on federal contracts.
Second, SBA sent pending applications from individually owned firms back to the applicants on September 10. It used its "Return to Business" system so they could update their files under the new rules. Applicants have 45 calendar days to resubmit. For an application returned on September 10, that window closes October 25.
The defense-critical list changes the order in which SBA reviews applications. The guidance does not say it changes who qualifies.
Who should pay attention
Small manufacturers in these codes or focus industries are the obvious audience. That goes double for shops that already make parts for large defense contractors but have never held a federal contract of their own.
Both priority lists sort businesses by NAICS code, so how a business describes itself matters. When a federal buyer looks up a small manufacturer, the first record they usually see is its SAM.gov registration. That record shows the NAICS codes the company chose and how it describes what it makes. If your products have changed since you registered, your codes may no longer fit your work.
Service firms will find less here. Both money paths are built around production, from new equipment to bigger plants.
The bottom line
If you make parts in one of these industries, the government has put in writing that it wants your business to grow. The money will come through Pentagon referrals and SBA lenders, not an open application. So the first businesses to benefit are likely to be the ones the Pentagon and SBA can already find.
If the NAICS codes in your SAM registration no longer match what you make, talk to a FEDCON advisor. The same goes if your 8(a) application came back and you're not sure what's missing.