Capped and Sunset Foreign Military Financing Loan Act of 2026

The President may issue loans to eligible foreign governments for purchasing U.S.-made defense articles and services, limited to countries designated as major non-NATO allies or strategic partners by the State Department, with loans carrying market interest rates and repayment terms of up to 12 years. Total loan principal outstanding cannot exceed $10 billion at any time, prioritized for nations facing immediate threats to shared U.S. security interests, such as countering aggression from adversarial states. No loan may be forgiven or converted to grants without congressional approval. The Secretary of State must submit quarterly reports to Congress detailing each loan's amount, recipient, purpose, repayment status, and risk assessment. Loans defaulting after 180 days trigger automatic suspension of new financing to that country. An independent review board, including members from the Departments of State, Defense, and Treasury, plus two congressional appointees, evaluates loan applications annually and recommends approvals to the President. This act promotes fiscal discipline by treating all aid as repayable loans, ensuring U.S. taxpayer dollars are protected while advancing defense partnerships.