Government Grants To Assist Small Businesses and Increase Innovation

July 22, 2021 5 min read

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The Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs are two grant opportunities that your business may qualify for. They're a bit complicated, so we are going to break the SBIR and STTR programs down for you.

After reading this article, you will know what they are, who is eligible, and how the process works.

What Are The SBIR and STTR Programs?

In a nutshell, both the SBIR and the STTR programs provide funding to small businesses for research and development (R&D). The government wants to increase its R&D of technology but offers the private sector the opportunity to do it. Through the SBIR and STTR programs, the government can reach its R&D goals while also incentivizing small businesses, referred to as SBCs.

The ultimate goal is to increase technological innovation and keep the U.S. competitive on the global stage. Both of the programs aim to encourage the participation of women-owned businesses and businesses from the economically disadvantaged.

An additional purpose is to foster economic growth by creating products (through R&D) for commercial use. Specific to the STTR program is the goal to unite small businesses with Research Institutes to encourage collaboration and mutual assistance.

How are the SBIR and STTR Programs Different?

While both programs provide federal funding to small businesses for research and development, there are differences in the program details. STTR focuses on partnering small businesses with a Research Institute, that is non-profit and has a scientific or educational purpose.

Examples of Research Institutes can include private nonprofits, hospitals, colleges or universities, or Federally Funded R&D Centers (FFDRC).

Which Businesses Are Eligible for the SBIR/STTR Programs?

Any business may apply; however, to be considered for the SBIR or STTR programs, your company must be a Small Business Concern (SBC). You must certify during phase I and phase II that your business qualifies as an SBC. For your small business to be considered an SBC, the following criteria must be met:

  • Business is for profit with a location in the U.S. and primarily operates in the U.S.
  • Business is an individual proprietorship, partnership, limited liability corporation (LLC), corporation, joint venture, association, trust, or cooperative.
  • Business is at least 51% owned and controlled by U.S. citizens/permanent residents OR by another SBC that is at least 51% owned and controlled by U.S. citizens/permanent residents.
  • The business has 500 employees and affiliates or less.

If your business fulfills the above requirements, you can be considered an SBC; however, your business must have an EIN. An EIN is a nine-digit number that identifies your business, similar to a social security number. Applying for an EIN with the IRS is free and relatively straightforward.

Additional SBIR/STTR Qualifications

Once your business is approved, there are other qualifications your business must adhere to, including:

1) You will need to attest that your business qualifies as an SBC during phase I, phase II, and possibly at other times during the process.

2) For the SBIR program, the SBC must complete at least 67% of the work for phase I and 50% of the work for phase II. For the STTR program, at least 40% of the work must be done by the SBC and at least 30% must be completed by the Research Institute.

3) The Project Manager must be employed at least 51% of the time by the SBC that was awarded the grant.

4) The R&D must be performed in the United States

Where Do You Apply to the SBIR/STTR Programs?

If you are interested in pursuing one of these programs, you need to apply with a participating agency. The Small Business Administration (SBA) does not accept direct applications for the SBIR/STTR programs because they delegate that responsibility to the participating federal agencies.

Federal agencies are responsible for the oversight of the SBIR/STTR funds so they accept the applications to their solicitations. The SBIR/STTR website does contain a list of open solicitations, but interested businesses need to apply directly to the federal agencies.

The solicitations for each agency will correspond to their own R&D needs. For example, one solicitation is through the Department of Health and Human Services– via the National Institute of Health. Their solicitation is for cancer research and prevention. There are currently over 300 open solicitations for you to look through. Participating federal agencies include but are not to limited to the following:

  • Department of Agriculture
  • Department of Commerce
  • Department of Defense
  • Department of Education
  • National Science Foundation
  • Environmental Protection Agency

After the solicitation/application is approved, the process is broken into three phases.

Step I

Step I (referred to as phase I) is the concept developing stage. The purpose of phase I is to map out the SBC's proposal and identify if the R&D will produce something that can be commercialized.

Remember, the federal government is looking for something tangible. They are not simply after ideas; the federal government contracts out their R&D requirements to private businesses, so they can produce some kind of technological advancement.

This is the time to dive into your ideas and prove that they can work on a large scale. Phase I funds normally do not exceed $150,000 but can be awarded up to $250,000.

Step II

Step II (or phase II) is the prototype development stage. This is the stage where the R&D continues from phase I and dives in deeper. The goal is to conduct all of the R&D necessary for commercialization.

SBCs typically must pass phase I to be eligible for phase II. Also, during this time the federal agency will provide a Commercialization Assistance Pilot Program, which can provide additional funding. The funding for phase II depends on the success of phase I and can reach as high as $1.5 million.

Step III

Step III (phase III) is the commercialization phase of your R&D, the period where the rubber meets the road. Phase III is the time when you prepare your product for the masses. This will typically include evaluating and testing products and technology, but it can also include more R&D to finalize the product.

Phase III does not typically include any SBIR/STTR funding, so SBCs that require more funding will need to pursue it elsewhere.

Are the SBIR/STTR Programs Right For You?

The SBIR/STTR programs are intended to provide federal funding to private SBCs who will engage in R&D. The purpose is to create technological advancements and products that meet the needs of the federal government, stimulate the economy, and keep America competitive in the global market.

The only way to determine if these programs are right for you is to investigate the open solicitations by the participating agencies. If you believe you have the idea that could solve their need, apply. If you have further questions, take a look at their FAQ pages and their program overview.

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