SBIR and STTR Programs Are Still in Limbo — What Small Businesses Need to Do Now

Five months. That is how long America's flagship small business innovation programs have been operating without congressional authorization, and there is still no clear path to a fix.

The Small Business Innovation Research and Small Business Technology Transfer programs — SBIR and STTR — expired on September 30, 2025. These are not obscure line items. They funnel roughly $4 billion annually to startups, university spinouts, and small R&D firms through set-aside percentages from every federal agency with a significant extramural research budget. NIH, NSF, DOD, DOE, NASA, USDA — all of them run SBIR programs. And right now, all of them are operating on borrowed time.

Three Bills, No Agreement

Congress is not ignoring the problem. The issue is that three competing proposals are pulling in different directions.

The simple extension. The House passed H.R. 5100, a clean one-year extension through September 30, 2026, with no programmatic changes. It keeps the lights on. It does not fix anything. It also has not moved in the Senate.

The overhaul. Senator Joni Ernst's INNOVATE Act proposes sweeping changes: higher set-aside percentages, restructured SBIR and STTR participation rules, and new eligibility criteria. The bill has industry support from groups that want the programs modernized but faces resistance from those who worry the changes could lock out smaller applicants.

The permanent fix. Senator Ed Markey and Representative Nydia Velázquez introduced the SBIR/STTR Reauthorization Act of 2025, which would make both programs permanent and gradually raise agency set-aside targets to 7 percent for SBIR and 1 percent for STTR. Permanent authorization would eliminate the recurring congressional drama that destabilizes the programs every few years.

Each approach has a constituency. None has enough votes to pass on its own. Congressional analysts broadly expect reauthorization language to be attached to a must-pass appropriations or defense bill, but the timing remains uncertain.

What the Lapse Actually Means

If you hold an active SBIR or STTR award, your funding is not immediately at risk. Agencies continue to administer existing awards under their general authority. The money that was obligated before expiration still flows.

The problem is with new awards. NIH issued NOT-OD-26-006, formally notifying applicants that SBIR and STTR notices of funding opportunity may expire early and that new competitions could be delayed or withdrawn. Other agencies have been less explicit but face the same constraint: without reauthorization, the legal basis for new SBIR solicitations weakens with each passing month.

For small businesses planning their next Phase I or Phase II application, this creates a planning vacuum. You cannot apply for a competition that does not exist yet, and agencies cannot guarantee when — or whether — they will post the next round.

The Stakes Are Larger Than the Programs

SBIR and STTR are not just funding mechanisms. They are how the federal government seeds its innovation pipeline. Phase I grants ($275,000 for SBIR at most agencies) let small firms prove a concept. Phase II ($1 million or more) funds development. Phase III transitions technology into government procurement or commercial markets. The system is designed to move ideas from lab to deployment, and it accounts for a disproportionate share of early-stage deep tech funding in the United States.

A prolonged lapse does not just delay individual awards — it degrades the pipeline. Small firms that depend on SBIR revenue cannot wait indefinitely. Some will pivot to commercial markets. Others will fold. The researchers and engineers working on these projects will find other jobs. When reauthorization eventually happens, the ecosystem that makes SBIR effective will have eroded.

What You Should Do Right Now

If you have an active award: Keep executing. Your funding is secure. Make sure your agency program manager knows you are on track, and document your progress carefully for Phase II or Phase III submissions.

If you are planning a Phase I application: Do not stop preparing. The strongest SBIR applicants are the ones with a technically mature proposal ready to submit the day a solicitation opens. When reauthorization lands — and it will, because the programs are too popular to kill — agencies will move fast to clear the backlog. Having your technical objectives, team, budget, and commercialization plan already drafted puts you weeks ahead of competitors who waited.

If you are weighing SBIR against other funding sources: Diversify. SBIR should be one channel in your funding strategy, not the only one. Federal agencies run non-SBIR grant programs (NIH R01, NSF CAREER, DOE FOAs) that are fully authorized and currently accepting applications. State-level innovation grants, foundation funding, and private accelerators can bridge the gap while SBIR sorts itself out.

If you want to influence the outcome: The National Small Business Association and Small Business Technology Council have been actively lobbying for permanent reauthorization. Public comment periods and congressional outreach matter — especially from small firms with concrete SBIR success stories that illustrate why the programs work.

The most likely outcome is still reauthorization, probably attached to a larger spending vehicle in the next few months. But "most likely" is not "guaranteed," and the uncertainty itself is already doing damage. The smart move is to prepare as if the programs will restart tomorrow while building alternatives in case they do not.

Small businesses navigating this uncertainty do not have to go it alone — Granted tracks federal and state funding opportunities in real time, so you can find SBIR alternatives and prepare your next proposal while Congress works out the details.