Are you able to connect to the SQL Server using a UDL (Universal Data Link) file? Please see the following Microsoft article for testing connections using UDL file:
Testing using the UDL may provide some additional details as to the connection error. Otherwise, I do see a support ticket has been opened for this issue. The assigned representative should reach out to you shortly to help diagnose this issue.
We tried using the UDL and with "Use a specific username and password" selected, it would not connect even though we made sure the username and passwords were correct. It did connect if we used "Use Windows NT Integrated Security" however.
Upon further investigation within SharePoint Backup itself, we found that it would not accept an alias name at all for the SQL instance. We had to use the servername\instance format. This, however, defeats the purpose of using an alias. If we have to change SQL servers in the future, we'll have to manually change it within SPB vs. changing just the alias on the system. Once we moved to the servername\instance format, it worked and I was able to continue on and complete the installation.
