Last Updated on
January 19, 2023
By
Excedr
When we think of grant funding, many of us think of opportunities for nonprofits. However, there are a number of grant programs for-profit small businesses and startups can apply to.
These include the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs, referred to collectively as the Small Business Programs, or America’s Seed Fund. The programs are used to support early-stage business throughout the US conducting various scientific research with the potential for commercialization.
While the Small Business Administration (SBA) coordinates and directs the two programs, there are several government agencies who actually administer the awards themselves and provide the programs’ funding.
In this article, we’ll review the SBIR program, the application process, which agencies are involved in its administration, and more.
While it’s common to see the SBIR program referred to in the singular, there isn’t actually just one. There are dozens, spread across multiple federal agencies, making up a large network of federally funded SBIR programs rewarding and encouraging US small businesses to perform research and development, with a goal of commercialization.
These programs allow entrepreneurs to explore their technical ideas, expand R&D, and in return, stimulate the US economy and federal agencies.
The SBIR program mission has 4 goals according to sbir.gov:
SBIR and STTR programs both have three phases, funded by 11 different federal agencies including the DOD, HHS, NSF, NASA, and more. Each of these agencies must allocate 3.2% of their $100M+ R+D budgets to the SBIR and STTR programs.
Phase I is focused on the general concept development proposed. This phase specifically focuses on technical development, practicality, and potential of commercialization. Small businesses funded in Phase I will also be reviewed for their overall and historical performances during this stage before they are eligible to receive additional awards in Phase II.
Phase I awards generally range from $50,000 to $250,000 in federal funding for an award period of 6 to 12 months.
After the qualifying period of Phase I, Phase II recipients are awarded to continue their R+D initiated in the previous stage, along with a further analysis of technical development and commercialization proposed post Phase II. The funding awarded will be based on results achieved in Phase I and generally provides $750,000 to the small businesses for a period of 2 years.
When applicable, Phase III is reserved for small businesses to begin commercialization of their R&D efforts from Phases I and II to show the success of the investment. There is no federal funding awarded during this stage through either the SBIR or STTR programs. Some Federal agencies may provide contacts, services, and further assistance for R&D, however, these are not funded through the SBIR/STTR.
In order to be eligible for the program, there are a few key criteria that a business needs to meet during the Phase I and II award periods. The following criteria applies to both SBIR and STTR programs:
These general eligibility requirements must be met by all applicants. If applicants in Phase I have prior awards, they must meet minimum performance requirements in order to qualify in applying for additional Phase I or “Direct-to-Phase II” awards, to ensure progress was made. The SBA provides specific transition rates and benchmarks required for the past 5 and 10 fiscal years.
*Small businesses owned by several venture capital, equity firms, or hedge funds with no group owning majority of company stock may also qualify.
Eligibility for the SBIR/STTR programs can be confirmed online through the eligibility guide and size standards tool provided by the SBA. You may also contact your local SBA District Office for further assistance.
Once confirmed, applying is completed online through the SBIR portal. There are a few steps that must be completed before you can submit your application and receive your award:
The SBA recognizes that the application process for both the SBIR and STTR awards can take as much as 200 hours with several steps before a proposal can be submitted. There are a few free online resources available to applicants to guide them through each step.
Online application bootcamps are regularly offered on a monthly basis, directly on the SBIR events website. Applicants can register for a webinar where they will learn more about their eligibility, advantages of the award, and will receive assistance to guide them through the process at no-cost.
If in-person assistance is preferred, the SBA also has partnerships with several organizations nationwide who are certified to train and assist SBIR/STTR applicants. Each state provides local assistance which can be found here.
If you are interested in learning more online, tutorials are available for all topics. From program basics to proposal development, the tutorials offered provide basic information but also specialized topic areas in order to prepare you for your submission.
The main difference between SBIR and STTR is that STTR award programs focus on cooperative partnerships between small business and nonprofit organizations, such as research institutions. In the STTR program, your small business must partner with a research institution during both the Phase I and Phase II awards.
Recipients must meet the same eligibility criteria as SBIR programs, as well as their partnering organizations. The partnering nonprofit organization must meet the following criteria:
While the mission of SBIR/STTR programs is similar—engage in R&D for potential commercialization—there are three key differences in which the STTR differs in the program regulations in addition to partnering with a research institution:
Funding for both the SBIR and STTR awards is reserved for R&D expenses only. This includes employee salaries, materials, supplies, and other direct costs associated with the R&D.
Businesses may also use funds for any consulting needed specifically for the project they applied for. Indirect costs such as electricity and rent can also be included when appropriate.
Equipment purchases and leases are not allowed to be funded with Phase I awards. However, businesses may use their funds for equipment in Phase II. There are specific terms provided by awarding agencies that must be consulted.
For instance, the NSF SBIR/STTR Solicitation defines equipment as “non-expendable, tangible personal property, having a useful life of more than one year and an acquisition cost of $5,000 or more per unit”.
Equipment must be requested in the proposal and should not be general pieces of equipment that the small business would be expected to have access to and available in their field.
In order to receive approval, equipment budget requests must be submitted with the following information:
Several federal agencies participate in the SBIR program, including the SBA, NSF, and NIH, among others.
The SBA was created in 1953 with the purpose of aiding small businesses and entrepreneurs to pursue their aspirations. It is currently the only cabinet-level department focused on providing resources, government contracting, and capital to small businesses.
It is also the administering agency of the SBIR/STTR programs, and while it does not directly provide grant funding, it does oversee the participation of the various federal agencies in the SBIR.
Through the grant program, the SBA invests in your technological solution, allowing you to pursue commercialization with the freedom to manage your own business.
The National Institutes of Health (NIH) is part of the U.S Department of Health and Human Services. The NIH mission is to “[be] the steward of medical and behavioral research for the Nation. Its mission is to seek fundamental knowledge about the nature and behavior of living systems and the application of that knowledge to enhance health, lengthen life, and reduce illness and disability.”
As a part of this mission, the SBIR/STTR programs support early-stage businesses turning their technologies and discoveries into products that better support patient care and overall health.
The NIH has 24 institutes nationwide that work directly with other federal agencies such as the CDC, FDA, and ACL to provide funding to small business entrepreneurs and research scientists. Currently, the NIH SBIR/STTR programs are the largest source of early-stage capital for the life science field.
The programs and agencies reserve $1.2+ billion in non-dilutive funds on an annual basis. These funds are dispersed to a diverse set of projects in the NIH portfolio which can be reviewed and accessed through NIH RePORTER.
Since 1950, the National Science Foundation (NSF) mission has been “to promote the progress of science; to advance the national health, prosperity, and welfare; to secure the national defense”. About 1/4 of all federal research at US colleges is funded by the NSF. Of the $8.8 billion in annual NSF funding, $200 million is reserved for the SBIR/STTR programs.
The NSF also has a diverse portfolio of businesses funded, primarily focusing on engineering, science, and biomedical technologies. Funded companies and start ups can be reviewed and accessed through the online NSF Portfolio.
While partnering with several federal agencies over the years, the SBA and NSF have partnered for 40+ years, funding America’s Seed Fund and its supported programs.
America’s seed fund is backed by the NSF, awarding up to $2 million in funding to individual businesses for operational and research costs. On an annual basis, the NSF typically awards its $200+ million in R&D funds across 400 domestic small businesses. The Seed Fund supports and disperses these funds within two programs:
Since 1982 the SBIR program has provided 179,000 awards, more than $54.3 billion in funding for small businesses. Over the years, federal research funds have been invested through several federal departments such as the DOD, NASA, and HHS—specifically the NIH.
In the most recent NIH/NCI Impact Study of 2018, major economic impact findings have resulted from the 690 SBIR/STTR grants awarded between 1998 and 2010. Positive economic impact has been shown through job generation, economic output, sales of commercialized products/services, and general tax revenues.
For example, in the period of those 12 years, an estimated 107,918 new jobs were created resulting in $9.1 billion in total sales generated for the economy.
Most awardees (89%) agree that their small businesses received these awards during critical funding periods of their plans. The business employees and owners, however, are not the only ones who have benefited from these programs. About 65% of the awards have funded developments of treatment options for patients who did not have available cancer treatments. During the 12 year period, 247 treatment products were fully commercialized for patient use.
On average, SBIR programs generate 65,578 jobs per year.
A recent SBIR and STTR Extension Act signed into law confirmed the continuity of the general SBA programs providing funding since the early 80’s. The newly proposed and signed bill included a few different bill sections, mainly focusing on several pilot programs implemented through September 2025.
Pilot programs across different federal departments have been reauthorized for the next three years as an opportunity to gather more data and confirm whether or not these programs should be added to the general SBIR/STTR funding programs. A few different pilots include:
The Proof of Concept Partnership Pilot program was created in 2012 through the National Defense Authorization Act. This program enables the NIH to use STTR funds specifically for research institutions, helping accelerate the creation of new small businesses focused on R+D and commercialization.
Gaps in funding, lack of understanding, and unavailable resources for technology are primarily focused on areas to improve when dispersing these funds. The NIH provides $9 million in funding for 3 different institutions.
SBIR funding can be an excellent non-dilutive option for biotechs performing R&D in areas of interest that align with the program’s mission and initiatives. Although the application process is time-consuming, competitive, and possibly confusing to those who have not applied for grants before, the payoff can be a huge boon to a small business or startup in need of funding.
If you’re in need of research and lab equipment to perform your work, but don’t want to spend your entire budget on a few pieces of equipment, lease what you need to preserve cash.
In tandem, securing funding for your R&D budget through the SBIR/STTR programs can leave you even more equipped to complete your research and hit important development milestones.
Our equipment leases won’t limit R&D progress, enabling equipment to be used in-house without any unexpected expenses, service coverage included. Leasing allows you to avoid expensive upfront costs and draining cash balances that were reserved for other business needs not covered by the Phase I or Phase II grants.
Contact us if you’d like to learn more about our program. We can explain how our leases work, next steps, and discuss how grants you have may qualify to be used for leasing. Our team can even draw up a lease estimate if you have the proper documentation available.