To amend title 10, United States Code, to restore the Department of Defense loan guarantee program for small and medium-sized business concerns that are economically dependent on defense expenditures.

Authorizes the Secretary of Defense to support through the provision of loan guarantees programs sponsored by the Federal Government, regional entities, State and local governments, private entities, and nonprofit organizations that assist small and medium-sized businesses that are economically dependent on defense expenditures to acquire dual-use (military and commercial) capabilities. Provides for the transfer of such loan guarantee authority and funding from the Secretary to the appropriate Federal agency by way of a memorandum of understanding.

Authorizes the Secretary to carry out the loan guarantee program during any fiscal year for which funds are specifically made available for such purpose. Requires competitive procedures to be used in the selection of appropriate businesses for the loan program, under specified criteria. Requires a borrower to demonstrate that, during any one of the past seven years, at least 25 percent of the borrower's sales were derived from: (1) contracts with the Department of Defense or defense-related activities of the Department of Energy; or (2) subcontracts in support of defense-related prime contracts. Provides for: (1) a maximum loan amount and a loan guaranty rate; and (2) a 60-40 allocation of loan funds to small and medium-sized businesses, respectively.

Provides for the continued availability through FY 1999 of current funding for the loan guarantee program.