If you are wondering what is the SBIR program, it is a U.S. federal program, created in 1982, that sets aside part of agency research budgets for small businesses doing innovative R&D. You will find its history, phases and status below.
This independent explainer sits within the wider topic of business grants, with SBIR as one federal example.
| Item | Value |
|---|---|
| SBIR program created | 1982 |
| STTR program created | 1992 |
| SBIR set-aside | 3.2% of extramural R&D funds (agencies with $100 million or more) |
| STTR set-aside | 0.45% of R&D budgets (agencies with $1 billion or more) |
| Authorized through | September 30, 2031 |
| SBIR awards obligated in FY2022 | $4.4 billion |
These figures come from the Congressional Research Service’s July 13, 2026 Insight and its December 15, 2025 In Focus. Figures and rules can change, so check the source before you rely on them.
How the SBIR program began
The origins trace to the 1970s. According to the SBIR.gov history tutorial, there was much concern about the U.S. losing its competitiveness as globalization increased, and a growing body of evidence showed small businesses playing a larger role in innovation and job creation.
Roland Tibbetts, long recognized as “the father of the SBIR program,” became Senior Program Officer at the National Science Foundation in 1972. A precursor, NSF SBIR, began there in 1977, and in 1982 the Small Business Innovation Development Act created the SBIR program across multiple agencies.
The Congressional Research Service summarizes Congress’s reasoning: small businesses are “the principal source of significant innovations in the Nation,” yet the vast majority of federally funded R&D is performed by large businesses, universities and federal laboratories.
SBIR.gov describes the program as offering competitive awards to stimulate technological innovation among small private-sector businesses, while giving government agencies new solutions to their needs.
What the three phases cover
Both SBIR and STTR use three phases, as CRS report R48629 explains. Phase I awards fund feasibility-related R&D, while Phase II awards fund prototypes or other R&D that builds on Phase I work.
Phase III focuses on commercialization. The programs do not provide funding in that phase, but they offer other incentives for federal procurement, such as sole source contracting.
Award sizes have changed over time. A CRS report dated November 14, 2012 noted that as of March 30, 2010 an SBA Policy Directive raised Phase I awards to $150,000, with Phase II awards now up to $1 million. Later directives may differ, so current agency solicitations are the place to check.
That same report says funding can be disbursed as contracts, grants or cooperative agreements. Readers who want a general primer on grant mechanics can also read about how do business grants work.
Who runs the program and who can take part
Execution is decentralized: each participating agency operates its own program using guidance issued by the Small Business Administration (SBA), according to CRS report R48629. This is a U.S. program, and terms vary by agency and country.
Funding comes from set-asides. The July 13, 2026 CRS Insight says agencies with extramural R&D budgets of $100 million or more must set aside 3.2% of such funds for an agency-run SBIR program. Extramural R&D is research done by outside organizations, such as universities and industrial firms, using federal funds.
As of the CRS December 15, 2025 update, 11 federal agencies operate SBIR programs. They are the Departments of Agriculture, Commerce, Defense, Education, Energy, Health and Human Services, Homeland Security and Transportation, plus the Environmental Protection Agency, NASA and the National Science Foundation.
The same update says eligibility is generally limited to for-profit companies owned and controlled by U.S. citizens or permanent residents with fewer than 500 employees. For SBIR, agencies may elect to award either 25% or 15% of funding, depending on the agency, to businesses majority owned by multiple venture capital operating companies, hedge funds or private equity firms. A 2024 GAO study found four agencies had used that authority since FY2013.
On scale, the CRS December 15, 2025 update reports that in FY2022 federal agencies obligated $4.4 billion in SBIR awards and $662.3 million in STTR awards. For history, a CRS report dated August 26, 2014 says that through FY2011 agencies had made more than 133,000 awards totaling $33.7 billion across both programs.
What is the STTR program and how does it differ?
The STTR program was created by the Small Business Research and Development Enhancement Act of 1992, according to CRS report R48629. Its aim is to facilitate the commercialization of university and federal R&D by small companies.
In practice it supports cooperative R&D between small businesses and research institutions, per CRS. A Winvale blog post dated April 1, 2026 adds that STTR requires small businesses to collaborate with a nonprofit research institution, such as a university or federal lab.
Agencies with extramural R&D budgets of $1 billion or more must set aside 0.45% for an agency-run STTR program, per the CRS Insight of July 13, 2026. As of the CRS December 2025 update, six agencies run STTR programs: Agriculture, Defense, Energy, Health and Human Services, NASA and the National Science Foundation.
Why the program keeps being reauthorized
Both programs carry a sunset provision, which the SBIR.gov tutorial defines as a law that ceases after a specific date unless further legislative action extends it. Since the SBIR program began in 1982, it has periodically been reauthorized. Key dates from the sources include:
- 1992: SBIR was reauthorized, and legislative language was added that highlighted commercial potential as a criterion for awards.
- 2000: the program was reauthorized until 2009.
- December 2011: after a series of Continuing Resolutions, the 2012 Defense Authorization Act reauthorized it.
- 2016: SBIR and STTR were reauthorized as part of the 2017 National Defense Authorization Act, pushing expiration to September 30, 2022.
- September 30, 2025: the statutory authority expired, per CRS report R48629.
- April 13, 2026: P.L. 119-83 was signed, per the CRS Insight of July 13, 2026.
During the lapse, CRS reported in its December 15, 2025 update that active awards continued, but agencies were not issuing solicitations and had suspended selection and funding of new awards. As of the CRS Insight of July 13, 2026, the Small Business Innovation and Economic Security Act reauthorized the programs through September 30, 2031, ending a six-month lapse.
The Insight summarizes selected provisions of that law:
- Security review: agencies must evaluate whether a small business presents a security risk, and must reject a proposal when a risk warrants denial.
- Proposal limits: beginning in FY2027, each agency program director must set a maximum number of proposals a small business can submit in a fiscal year.
- Strategic breakthrough awards: agencies obligating more than $100 million in SBIR funding annually may use up to 0.5% of SBIR funds for awards of up to $30 million, matched dollar for dollar.
Debate over multiple award recipients helped shape reauthorization. Per CRS, GAO found that 22 small businesses received 50 or more Phase II awards from FY2011 through FY2020, receiving 10% of Phase II funding while making up less than 1% of awardees. CRS also notes that studies of such firms “present conflicting evidence” on commercialization outcomes.
Anyone researching government funding can also read about business grant scams to see common warning signs.
Frequently asked questions
Is SBIR a loan or an equity investment?
Show answer
The sources describe SBIR awards as contracts, grants or cooperative agreements, per the 2012 CRS report. A Winvale post of April 1, 2026 calls SBIR non-dilutive funding, meaning businesses do not give up equity. Terms vary by agency.
What is the difference between SBIR and STTR?
Show answer
SBIR dates to 1982 and STTR to 1992, according to the CRS Insight of July 13, 2026. STTR supports cooperative R&D between small businesses and research institutions, and its set-aside is 0.45% compared with 3.2% for SBIR.
Is the SBIR program still authorized?
Show answer
As of the CRS Insight of July 13, 2026, the programs are reauthorized through September 30, 2031, after a six-month lapse. Authority has lapsed before, so check SBIR.gov for the latest status.
Does SBIR fund Phase III?
Show answer
No. According to CRS report R48629, the programs do not provide funding in Phase III but offer other incentives for federal procurement.
This article is for general information and education only and is not financial, investment, tax or legal advice.
