SBIR/STTR Equipment Budgeting: A Practical Guide for Grant-Funded Labs

Getting SBIR or STTR grant funding is a huge milestone—but spending it wisely is just as important. For small businesses and startups, these grants open the door to essential R&D activities, including acquiring the lab equipment needed to generate meaningful data. But budgeting for that equipment—and justifying it properly in your grant application—can be trickier than it seems.

SBIR/STTR grants come with specific rules around direct and indirect costs, allowable expenses, and how equipment must be categorized and documented. Missteps can delay your award, trigger audits, or undermine your commercialization plan down the line.

In this guide, we’ll walk through how to plan, budget, and procure lab equipment using SBIR and STTR funds—whether you're applying for a Phase I award or expanding operations under Phase II. We’ll cover key cost principles, budgeting strategies, and procurement tips that can help you stay compliant and move your research forward.

Why Equipment Planning Is Critical for SBIR/STTR-Funded Labs

In the rush to get a grant application out the door, it’s easy to treat equipment budgeting as just another line item. But for labs funded through the Small Business Innovation Research (SBIR) or Small Business Technology Transfer (STTR) programs, equipment costs can carry outsized importance—both in terms of funding approval and project execution.

Why? Because the federal government places tight controls on how public funds are spent. Agencies like the National Institutes of Health (NIH), National Science Foundation (NSF), and Department of Energy (DOE) review your equipment budget not just for accuracy, but for strategic alignment with your proposed research and development goals.

Overspending—or misallocating—on equipment in Phase I could make your proposal less competitive. Under-budgeting in Phase II could leave your team scrambling to meet project milestones. Either way, unclear or poorly justified costs can raise red flags for reviewers and subject matter experts tasked with evaluating your plan.

Done right, a well-structured equipment budget:

• Demonstrates that your team understands what’s needed to carry out the science
• Shows that you're not overreaching for high-cost instruments with limited use
• Gives confidence to reviewers that your startup is capable of managing federal funds responsibly

And for for-profit small businesses planning future rounds of federal funding—or looking to transition into commercialization—solid budgeting practices build trust and reduce risk over time.

SBIR/STTR awards aren’t just about science—they’re also about operational credibility. And how you plan for that next piece of equipment can say a lot about how ready you are to scale.

What You Can—and Can’t—Buy With SBIR/STTR Grants

Before you start building your budget, it’s important to understand what qualifies as equipment under federal guidelines—and what doesn’t.

The SBIR/STTR cost principles, outlined in the Code of Federal Regulations (CFR) and agency-specific policies, define equipment as tangible personal property with a per-unit cost of $5,000 or more and a useful life of more than one year. Anything below that threshold is typically considered supplies or materials and should be budgeted differently.

Allowable equipment costs

Allowable equipment is directly tied to your research goals and justified in your application. Common examples in biotech and life sciences include:

• qPCR systems
• -80°C freezers
• Microscopes (confocal, fluorescence, live-cell)
• HPLC and LC-MS systems
• Cell counters or incubators
• Thermal cyclers

If a piece of equipment is essential to completing your proposed research and development activities, and you explain its use clearly in your budget justification, it will generally be considered allowable.

Unallowable or questionable items

Some items—even if helpful—are considered unallowable or require significant justification. These include:

• General-purpose office equipment (desks, chairs, laptops not used for instrumentation control)
• Lab furniture not integral to the scientific activity
• Equipment upgrades with limited R&D value
• Redundant purchases (e.g., a second HPLC system without a clear operational need)

Grant reviewers—and federal agencies—expect awardees to be conservative and transparent with federal funding. Even if a line item seems reasonable internally, if it doesn’t clearly support your scientific aims, it could be flagged or removed.

Pay attention to agency-specific rules

Some agencies (like NIH, NSF, or DOE) have their own tutorials or FAQs around allowable equipment costs. Review their solicitation-specific guidance carefully. For instance, the NSF SBIR/STTR program often discourages major equipment purchases in Phase I, preferring applicants to use core facilities, lease equipment, or rely on subcontracted services when possible.

If you’re ever unsure, ask during the pre-submission window. Most agencies encourage questions—and taking advantage of that can help you avoid disallowed expenses later.

How to Structure Your Equipment Budget

Once you’ve identified what equipment is both allowable and necessary, the next step is translating that into a clear, compliant budget. In SBIR/STTR grant applications, that means aligning your equipment costs with the federal cost principles and presenting them under the right categories—with supporting documentation to back them up.

Direct costs vs. indirect costs

Equipment typically falls under direct costs, which are expenses that can be specifically attributed to your proposed research. These include:

• The purchase price of the equipment
• Shipping and installation
• Required calibration or validation services
• Accessories necessary for the equipment to function as proposed

Indirect costs, on the other hand, are broader—things like rent, utilities, administrative salaries, and general operations. While your indirect cost rate (or negotiated overhead rate) covers those, it should not include equipment. In fact, most federal agencies exclude equipment from the indirect cost base when calculating total allowable costs.

Tip: Double-check how your indirect rate agreement treats capital equipment—especially if you’re using the de minimis rate (10%) or negotiating for the first time.

Think in line items, not bundles

Be precise. List each piece of equipment separately in your SBIR or STTR proposal, along with:

• Quantity
• Unit cost
• Total cost
• Vendor or manufacturer (if known)
• How the equipment supports the scientific aims

Avoid lumping instruments together under vague categories like “lab equipment.” Reviewers want to see a transparent allocation of funds that maps cleanly to your project scope.

Shared equipment and partial allocation

If equipment will be shared across multiple aims or used by subcontractors, note that in your budget and justification. In some cases, you can allocate a portion of the cost to your SBIR/STTR grant—especially if the equipment has broad institutional use or overlaps with a research institution in a subaward role.

Agencies like NIH and DOE are generally supportive of this practice, as long as it’s justified and documented.

Writing a Solid Budget Justification

In SBIR and STTR grant proposals, the budget justification isn’t just a formality—it’s your opportunity to connect the dots between your research goals and your requested equipment. A strong justification shows reviewers and program officers that your small business understands both the science and the cost structure needed to execute it responsibly.

Be specific, not generic

It’s not enough to say, “We need a centrifuge.” Instead, explain:

• Why the equipment is essential: What function does it serve in the project?
• When it will be used: Is it needed at the start of the project or in Phase II?
• Who will use it: Which team members or subcontractors will rely on it?
• Why this model or configuration: Are there technical reasons you need specific capabilities?

For example: “We are requesting funds to purchase a refrigerated centrifuge (Eppendorf 5810R) required for high-speed spin-down of viral vectors in Aims 1 and 2. The instrument will be used by our internal research team during Phase I and later by subcontractors at XYZ CRO in Phase II. Alternatives were considered, but this model provides the capacity and speed range necessary for our downstream processing step.”

Tie back to project aims

Reviewers—especially subject matter experts—will be looking for alignment. Every piece of equipment should tie clearly to a specific aim, milestone, or deliverable in your SBIR/STTR proposal. If it feels unrelated or overly speculative, it may be flagged during review.

Avoid audit red flags

To keep your proposal on solid ground:

• Don’t request backup or redundant equipment unless well justified.
• Avoid unusually expensive systems without a clear need.
• If you're leasing instead of buying, clarify that in your budget narrative.

And remember: grant reviewers aren’t just evaluating the science—they’re also gauging how responsibly your startup handles federal funding. A well-written justification builds trust, reduces follow-up questions, and improves your overall proposal strength.

Alternatives to Buying: Leasing, Subawards, and Shared Resources

Not every SBIR/STTR-funded project needs to own every piece of lab equipment. Depending on your stage, scope, and available funding, alternative strategies like leasing, subcontracting, or using shared facilities can be more cost-effective—and more aligned with how federal reviewers assess proposals.

Leasing equipment

Leasing gives you access to high-value lab instruments without the upfront capital expense of a purchase. This can be a game-changer for Phase I awards, where budgets are modest, timelines are short, and spending flexibility is essential.

Leasing can help you:

• Conserve grant funding for other direct costs like personnel or reagents
• Avoid overcommitting to equipment that may not be needed beyond the initial project phase
• Match costs to the grant period, so you’re only paying for equipment while you’re using it
• Access newer technology, which can improve performance without triggering capital asset rules or long-term depreciation considerations

Unlike purchasing, leasing also makes it easier to pivot if project needs shift—something that often happens between Phase I feasibility studies and more resource-intensive Phase II research.

Be sure to clearly state in your budget justification that you plan to lease rather than buy, and briefly explain why it better supports your research and development goals. Some agencies may request vendor quotes or leasing terms to confirm rates are reasonable and aligned with the grant’s performance period.

Accessing shared facilities

Early-stage SBIR/STTR awardees often conduct research at research institutions, incubators, or nonprofit labs with access to shared instrumentation. If you plan to use a core facility rather than acquire your own equipment, make that clear in your budget and research plan.

This can strengthen your application by showing you’re leveraging existing infrastructure to reduce costs and avoid unnecessary capital spend. Just make sure that any facility fees or usage charges are documented correctly and that the arrangement is aligned with your project timeline.

Subcontracting equipment-driven work

You can also subcontract specialized work—like sequencing, imaging, or assay development—to a CRO or university lab that already owns the required instrumentation. In these cases, the cost of equipment is built into the service fee, simplifying your budgeting and avoiding the need to request high-dollar purchases or leases.

To do this correctly:

• Name the subcontractor in your application
• Include a detailed budget and scope of work for the subaward
• Explain why subcontracting is the best choice (e.g., expertise, turnaround time, access to regulated environments)

Leasing, shared access, and subcontracting aren’t just cost-saving tactics—they’re signals to reviewers that your team is resourceful, flexible, and focused on making the most of public funding. For SBIR/STTR applicants, that mindset can be as valuable as the science itself.

Procurement Tips: From Quote to Purchase

Once your SBIR or STTR grant is awarded, your equipment budget moves from theoretical to operational. Now you’re responsible for actually acquiring what you proposed—while staying compliant with federal procurement rules. Here’s how to navigate the process.

Get quotes early

Federal agencies generally require supporting documentation for any equipment over the $5,000 threshold. Even during the application phase, it’s smart to gather vendor quotes—not only to justify your line items, but also to avoid surprises when you go to purchase later.

If you’re using GSA Advantage, university pricing agreements, or other government purchasing programs, note that in your proposal and keep the documentation handy.

Follow your organization’s procurement policies

If your company has procurement policies (e.g., requiring competitive bids, approval thresholds), they must be followed—and often disclosed during post-award audits. If you're new to SBIR/STTR awards, consider developing basic procurement SOPs early on to avoid inconsistencies.

Tip: If your organization lacks a formal policy, default to federal guidance—such as requiring at least two or three quotes for equipment purchases over $10,000.

Use grant funds only for approved items

Stick to the equipment listed in your approved budget. If your research needs change mid-project and you need to swap or add a different system, you’ll need prior approval from your program officer or grants management specialist.

Unapproved purchases—even if scientifically justified—can result in flagged audits or withheld reimbursements.

Track delivery, ownership, and asset salue

After purchase, keep records of:

• Purchase orders and payment receipts
• Serial numbers and manufacturer info
• Installation or calibration documentation
• Asset tagging and depreciation schedule (if applicable)

This matters not just for audits, but for internal planning—especially if you plan to pursue Phase II funding, where equipment reuse and sustainability will be evaluated.

Budgeting Strategically for Growth

Strong science is what earns you an SBIR or STTR award—but strong budgeting is what helps you execute, scale, and earn trust with reviewers and agencies over time. That includes how you think about equipment: not just as a line item, but as a strategic resource tied to your lab’s ability to deliver results.

Whether you're applying for a Phase I SBIR to run an early proof-of-concept study or preparing a Phase II commercialization plan, your equipment budget tells a story. It shows that you:

• Understand the technical needs of your research
• Know how to manage federal funding responsibly
• Are building a lab infrastructure that can scale

It also positions you for long-term success. Agencies like the SBA, NIH, and NSF are looking for awardees who can grow into sustainable businesses—not just complete a single project. How you handle equipment procurement, cost allocation, and justification is part of that picture.

And while every startup faces tradeoffs, the most successful SBIR/STTR-funded teams tend to think long-term. They plan ahead for equipment needs, explore options like leasing or subawards when appropriate, and structure their budgets with compliance and flexibility in mind. Ultimately, a smart equipment budget isn’t about spending the most—it’s about spending wisely, delivering on your research goals, and setting the stage for whatever comes next.

Need lab equipment for an SBIR or STTR-funded project? Excedr can help! Get in touch to learn more about leasing the instruments you need—without straining your grant budget.

We’ve worked with startups across biotech and life sciences to align equipment access with federal funding timelines and cost principles.