Defense Secretary Pete Hegseth testifies during a Senate Armed Services Committee hearing on the of Defense Department's FY27 budget request, on April 30, 2026.
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The Pentagon office that lends money to weapons developers would be allowed to take equity stakes in private companies deemed critical to national security under draft provisions of the 2027 defense policy bill.“We have allowed them to take equity in certain sectors. We have, what I think, is a very robust reporting regime and ethics regime, and we are working to reorganize or rationalize equity at the department by co-locating it with the loan authority at the Office of Strategic Capital and leaving the industrial-based fund, IBAS, as a tool for smaller dollar grants…as it's traditionally been used,” a congressional staffer with the Senate Armed Services Committee told reporters last week. Meanwhile, the defense spending bill passed out of the House Appropriations Committee’s defense panel would give the Office of Strategic Capital $2.16 billion in loan authority and $216 million “to carry out the capital assistance program, including loans, loan guarantees, and technical assistance,” according to legislative language and the bill summary. The Senate Armed Services Committee passed its version of the 2027 National Defense Authorization Act earlier this week to be considered on the Senate floor. It included provisions regarding the Pentagon’s ability to take financial stakes in defense contractors.Using existing authorities, the Pentagon has already taken equity stakes worth more than a billion dollars in defense-related companies. High-profile examples include taking a $400 million stake in a rare-earths producer last July and a $1 billion stake in L3Harris’ solid rocket motor business in April. The latter drew congressional scrutiny.The SASC bill does several things with respect to equity investments, according to the bill summary:
