New Program Pledges $1 Billion Annually to Fund US Manufacturing Scale-Ups, Backed by Taxpayer Guarantee

The new Scale-Up Manufacturing Investment Company Act of 2025 is designed to fix a problem that’s been plaguing U.S. innovation: the “valley of death.” That’s the point where a tech startup has a great prototype but needs massive capital to build its first real factory and start commercial production. This bill creates a brand-new federal program to help private investment funds put money directly into those projects, keeping the manufacturing of U.S.-invented tech right here at home.

The Government’s New Matchmaking Service

Think of this as the government stepping in to make the economics of building a factory in the U.S. more attractive. The bill establishes the Scale-Up Manufacturing Investment Program under the Small Business Administration (SBA). This program licenses private investment funds—called Participating Investment Funds—that commit to raising at least $250 million in private capital. Once licensed, the government offers these funds leverage, meaning it will back their investments up to a 1:1 match against the private money they raised.

This isn't free money; it’s a guarantee. The bill authorizes up to $1 billion annually in total leverage across all participating funds. Critically, the full faith and credit of the United States is pledged to pay back the principal and interest on the debentures the funds issue. If the investments go south, taxpayers are on the hook, though the program attempts to mitigate this risk by charging leverage fees between 3% and 5.5% of the guaranteed amount.

Who Gets the Money and Why It Matters

The goal is to fund Qualifying Manufacturing Projects—investments that help small, emerging manufacturers build their first production facilities or introduce new technologies. The idea is to target the advanced manufacturers who need heavy equipment and specialized facilities, not just software companies. For example, if a startup invents a breakthrough battery technology, this fund could provide the capital needed to build the first gigafactory in Ohio instead of watching that tech go to South Korea.

There are strict rules on how the funds must invest. They can’t put more than 10% of their total capital into any single project, and no more than 50% of the money they give to a manufacturer can come from the government’s guaranteed leverage. This forces the private funds to keep significant skin in the game. The bill also includes a mandate for the Administrator to increase outreach and investments specifically targeting small businesses owned by socially and economically disadvantaged individuals, women, veterans, or people with disabilities.

The Fine Print on Risk and Oversight

While the program addresses a real economic bottleneck—the lack of capital for physical manufacturing scale-ups—it’s not without risk. The program is essentially designed by and for large, sophisticated private investment funds, requiring a minimum of $250 million in private capital to even participate. The SBA Administrator has broad authority to license these funds based on subjective criteria like the manager’s “proven investment experience” and “good reputations,” which could lead to favoritism.

To keep things in check, the bill requires intense oversight. Funds must submit written valuations of their investments twice a year and provide annual audits by an independent CPA. If they violate the rules, they risk forfeiting their rights to participate. Furthermore, financial institutions that invest in these new manufacturing funds get a positive boost when assessed under the Community Reinvestment Act (CRA), providing an extra incentive for banks to participate.