Office of Strategic Capital OSC

The Defense Department created the Office of Strategic Capital on December 1, 2022, and Congress gave it authority to make and guarantee loans in the defense authorization law for fiscal 2024. It aims to attract private investment to technologies and supply chains the military considers critical but that struggle to get financing, such as advanced materials, microelectronics, batteries, space systems, and rare earth processing, where China has dominated.

Unlike grants or contracts, the office's loans must be repaid, and it partners with private lenders and investors. It issued its first funding notices in 2024. In 2025 and 2026 it made large conditional loan commitments to rare earth and critical mineral processors, including 500 million dollars to Phoenix Tailings and 725 million dollars to Energy Fuels, and lent to MP Materials as part of the deal that made the Defense Department that company's largest shareholder.

Supporters say the office uses the government's low borrowing costs to build domestic industries vital to national security. Critics worry about the government picking winners, taking on credit risk, and favoring politically connected companies, and some say it duplicates the Energy Department's loan office and other programs. Its loans are part of a wider toolkit that includes Defense Production Act funding and, since 2025, direct equity stakes.