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Updated Feb 13, 2024

What Is the Small Business Innovation Research Program?

The SBIR program connects small businesses with government grants for research, development and product commercialization.

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Max Freedman, Business Operations Insider and Senior Analyst
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Dr. Geoffrey Nicholson, former research and development director at 3M, once said, “Innovation is the transformation of knowledge into money.” Sometimes, small businesses need outside support to make that transformation. That’s where the National Science Foundation’s (NSF) Small Business Innovation Research (SBIR) program comes into play. Below, learn all about this program and how – and if – you can apply for business funding through it.

What is the SBIR program?

The SBIR program supplies contracts and government grants to small businesses with potential research and development (R&D) opportunities that could develop into commercial products. This program and its sister program, the Small Business Technology Transfer (STTR) program, stimulate technological innovation in the private sector by providing seed money for high-risk, high-reward ventures.

All federal government agencies with an R&D budget over $100 million must allocate 3.2 percent of their budget to SBIR funding. The U.S. Small Business Administration (SBA) reports that 11 agencies currently meet this budgetary requirement. Five of these agencies also participate in the STTR program. The SBA guides the participating agencies’ program implementation, reviews their progress and reports its findings to Congress.

Notably, the intellectual property rights for any developments that result from the SBIR and STTR programs remain with the business, not the government. This aspect of the program makes it a highly valuable resource for any business looking to build new products and bring them to market. You essentially get free money to develop, commercialize, and register and trademark a product the government sees as highly valuable. 

Did You Know?Did you know
The SBA also oversees a high-quality loan program for small businesses. Learn more via our guide to getting an SBA loan.

What are the three phases of the SBIR program?

If your business is selected to participate in the SBIR program, your involvement will occur across the following three phases:

  • Phase I: Across six months for the SBIR program or 12 months for the STTR program, your business must determine whether your R&D initiative is feasible, technically sound and revenue generating. The goal is for the agency that awards you money to decide whether to advance your business to Phase II funding. Your Phase I award will range from $50,000 to $250,000.
  • Phase II: Over the course of two years, your business will continue the R&D initiatives you began in Phase I. This phase also requires a more formal assessment of your project’s technical, scientific and commercial merit. A typical Phase II award includes $200,000 of funding.
  • Phase III: Notably, this phase involves no government funding. However, in some cases, the funding agency may offer production contracts to facilitate the commercialization processes that comprise this phase. If so, you can safely assume the U.S. government will use the product you develop. This in and of itself can lead to tremendous revenue for your business.

Who is eligible for the SBIR program?

Your business can apply for SBIR Phase I funding – and, after that, Phase II funding – if it is:

  • Based in the U.S.
  • Organized for profit
  • At least 50 percent owned and controlled by at least one U.S. citizen or permanent resident alien
    • Alternatively, your business may be at least 50 percent owned and controlled by other small businesses. Each of these businesses must also be at least 50 percent owned and controlled by at least one U.S. citizen or permanent resident alien.
    • You can apply for SBIR funding if more than one hedge fund, venture capital firm or private equity firm owns and controls your business. However, this criteria applies only if none of these funds owns a majority of your business’s stock.
  • A company with at most 500 employees, including affiliates (For SBIR funding, the term “affiliate” means a person or business with enough power to control your operations.)

If your organization applies for STTR instead of SBIR funding, three additional qualifying criteria apply. Your organization must be a:

  • U.S.-based nonprofit research company
  • Federally funded R&D center 
  • Nonprofit higher education institution

Additionally, if you have previously received Phase I SBIR awards, you must qualify for commercialization according to in-depth government requirements. Visit the SBIR Performance Benchmark Requirements web page for details. 

How to apply for the SBIR program

The process of applying for SBIR funding may vary depending on the agency through which you’re seeking funding. In general, though, the process will at least somewhat follow the steps below:

1. Browse agency funding opportunities.

Go through the 11 funding agencies’ SBIR opportunities with a fine-toothed comb. Pay close attention as you read about the opportunities so that you apply only for funding for which you actually qualify. Your attention to detail can also help you avoid administrative errors that could delay your application or lead to unmerited funding denials. 

2. Register your business with key websites.

Most, if not all, SBIR participating agencies require you to register your business with Grants.gov, the SBA and several other websites. This step can be time-consuming – the application itself might not take all that long, but you might wait weeks for approval confirmation. It’s thus best to take this step well ahead of when your business needs funding.

TipTip
Whether you're securing a business grant through public or private agencies, the more lead time you can give yourself, the better. Both private and public funders typically spend weeks reviewing applications.

3. Speak with agency staff, if possible.

Some SBIR participating agencies, such as the National Institutes of Health (NIH), encourage applicants to discuss their ideas with agency staff before applying. You may want to pursue this step no matter which agency you hope will fund your initiatives. Your conversations can help you see whether your ideas are ready for SBIR consideration or if you should pause applying and flesh them out further.

4. Submit your application directly via your funding agency.

Many SBIR participating agencies operate their own portals through which you must submit your application. Alongside your application, you’ll need to submit a proposal detailing your R&D goals and how you’ll use your funding toward them. 

Typically, you will have registered an account with your agency’s required portals in step 2. Once you’ve applied, you should use the agency’s primary SBIR application portal to track your status and confirm that no errors occurred during filing. 

5. Share additional information if necessary.

As you continue to check your application’s status, you may see requests from the agency for more information. Share this information as soon as possible to move your application closer to a final decision. After all, SBIR proposal and application reviews are known for long wait times because participating agencies gradually pore over all the information.

6. Look for an application decision.

The agency will tell you whether you’re approved or denied. If you’re approved, you can draw funds from your grant to formally initiate your involvement in the SBIR program. If you’re denied, you can resubmit your application with more information. This process involves all the same steps as your initial application.

FYIDid you know
If your SBIR application is denied, there are other ways you can leverage your R&D initiatives to improve your finances. For example, if you qualify for the R&D tax credit, you can significantly reduce your tax burden. You can then funnel the money you've saved into your R&D processes.

From funding to finished

If your business is approved for SBIR participation, the money you receive may be exactly what you need to bring your boldest ideas to life. It’s not just the money that matters; the funding agency’s support can point you toward the best way to commercialize your offerings. With both the money and the expert assistance necessary to bring a product to market at scale, your biggest goals will be within reach.

Ned Smith contributed to this article.

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Max Freedman, Business Operations Insider and Senior Analyst
Max Freedman has spent nearly a decade providing entrepreneurs and business operators with actionable advice they can use to launch and grow their businesses. Max has direct experience helping run a small business, performs hands-on reviews and has real-world experience with the categories he covers, such as accounting software and digital payroll solutions, as well as leading small business lenders and employee retirement providers. Max has written hundreds of articles for Business News Daily on a range of valuable topics, including small business funding, time and attendance, marketing and human resources.
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