SBA Hot Topic Tuesday: SBA Revives the World War II Small War Plants Strategy

September 15, 2026

Bob Coleman
Founder & Publisher

SBA Hot Topic Tuesday: SBA Revives the World War II Small War Plants Strategy

New SBA–Department of War Effort Pairs Defense Contracts With a 90% SBA Guaranty for Qualifying Manufacturers

SBA is going back to 1942.

SBA and the Department of War have created the Smaller War Plants Commission, a new effort to expand the small manufacturers and suppliers that make up America’s defense industrial base.

For SBA lenders, the opportunity is financing the manufacturers Washington wants to expand.

SBA says small businesses make up more than 70% of the defense industrial base. The new commission will direct capital, private investment and contracting opportunities toward manufacturers and suppliers needed to expand military production.

The strategy has been used before.

Congress created the original Smaller War Plants Corporation on June 11, 1942, six months after Pearl Harbor. America needed aircraft, ships, weapons, ammunition and military equipment on a scale never attempted before. The largest defense contractors could not do it alone.

The Smaller War Plants Corporation brought thousands of smaller manufacturers into the war effort. It financed plant construction and expansion, machinery, equipment, supplies and working capital. It also helped small companies obtain war contracts and the materials needed to perform them.

It was one of the ways America turned its industrial base into the Arsenal of Democracy.

That history leads directly to SBA.

President Dwight D. Eisenhower signed the Small Business Act on July 30, 1953, creating the Small Business Administration and bringing earlier federal small-business programs under one agency.

Two years later, Eisenhower summed up the philosophy behind the agency:

“The prosperity of our small business enterprises is an indispensable element in the maintenance of our economic strength.”

Seventy-three years after SBA was created, that philosophy is being applied again to national defense.

For lenders, the financing component matters.

Under SBA’s Made in America Loan Guarantee, qualifying manufacturers can use the International Trade Loan program with a 90% SBA guaranty, compared with the standard 75% guaranty on larger 7(a) loans. The financing can support machinery, facilities and increased production capacity.

The Smaller War Plants initiative is also moving beyond the original commission announcement.

On September 10, SBA announced priority 8(a) application processing for businesses in 10 defense-critical industries, including ammunition manufacturers, machine shops, aircraft-parts manufacturers, electronic-component manufacturers, iron and steel mills, fabricated-metal manufacturers and shipbuilders.

That gives SBA lenders a defined market to prospect.

A small defense supplier may win a contract and suddenly need another production line, new machinery, a larger facility, inventory or additional working capital. Qualifying manufacturers can obtain a 90% SBA guaranty through the Made in America International Trade Loan program to help finance that expansion.

The original Smalerl War Plants Corporation helped put America’s small factories to work winning World War II.

Eisenhower later made support for small business a permanent federal mission when he signed the law creating SBA.

Now SBA is returning to those roots — with SBA lenders financing the next generation of America’s defense industrial base.