House Passes Bill Doubling SBA Manufacturing Loan Limits to $10 Million, Aiding Deep Tech Growth

The U.S. House of Representatives has passed H.R. 3174, the "Made in America Manufacturing Finance Act," significantly increasing the Small Business Administration's (SBA) loan limits for small manufacturers from $5 million to $10 million. This bipartisan legislation, sponsored by Congressman Roger Williams (R-TX), aims to bolster domestic industrial capacity and provide critical capital to manufacturing, deep tech, and hardware startups. The bill now moves to the Senate for consideration.

A key aspect of this legislative change is its potential impact on cash-burning startups, particularly through the SBA's Manufacturer’s Access to Revolving Credit (MARC) program. As noted by Aaron Slodov, "the critical question is whether this is actually useful for manufacturing/deep tech/hardware startups that are burning cash." The answer, he explained, is yes, due to a subtle but crucial mechanism.

Normally, SBA loans can be challenging for companies with negative cash flow, but the MARC program explicitly allows "projection-based underwriting." This means businesses do not need immediate debt service coverage but must demonstrate they can achieve it within two years. Slodov highlighted that this "bridges the specific valley of death where you have orders but lack the working capital to buy the inventory to fulfill them."

While offering significant opportunities, these loans are not "free money." They typically require personal guarantees from owners with a 20% or greater stake in the company and often a 20% equity injection for new firms. However, the increased limit is transformative; Slodov stated, "$5m was often too low to fund serious industrial capacity. at $10m this becomes a legitimate alternative to equity for financing the physical plant."

The "valley of death" refers to the challenging period where deep tech and hardware startups struggle to secure funding between initial research and commercialization due to long development cycles and high capital intensity. The increased loan limits under H.R. 3174, coupled with the MARC program's flexible underwriting, are designed to help these ventures scale production and compete more effectively, fostering American innovation and job creation.