SBIR/STTR Program 2026 News and Updates

By Ramya Vijapurapu, SBTDC Technology Commercialization Counselor

2025 was a truly difficult year for innovation-based companies that rely on SBIR/STTR funding. On October 1, 2025, it only got more difficult.

In our previous article discussing SBIR/STTR, we mentioned a great deal of potential changes coming to the funding program. These changes included, but may not be limited to, funding freezes, review process interruptions, re-reviews, indirect costs being reduced from 40% to 15%, the Innovation Tax, and proposed budget cuts to the SBIR/STTR agencies. Our previous article also discussed 2 key bills that were introduced in the House of Representatives: 1) The SBIR/STTR Reauthorization Act, which overall proposes that the SBIR/STTR program becomes permanent and does not require reauthorization every 3 years, and 2) The INNOVATE Act, which overall aims to reduce the number of SBIR/STTR “mills”: companies that have raised $75M+ through SBIR/STTR alone.

As the September 30, 2025 deadline for reauthorizing the SBIR/STTR program came closer, some members of the House proposed a simple 1-year extension of the SBIR/STTR without any changes. Because Congress could not agree on how they would like the SBIR/STTR program to be structured, the program officially lapsed on October 1, 2025.

What is the SBIR/STTR program?

The Small Business Innovation Research (SBIR) program was established in 1982 by Congress because they saw small businesses as “the principal source of significant innovations in the Nation,” even though innovation mainly came from large corporations, academia, and federal labs. The SBIR program’s 4 main objectives are to: (1) stimulate innovation, (2) increase the use of small businesses in addressing federal R&D needs, (3) foster the participation of socially and economically disadvantaged individuals in innovation and entrepreneurship, and (4) increase private sector commercialization of technologies derived from federally funded R&D. SBIR’s “sister program,” the Small Business Technology Transfer (STTR) program came into existence through the Small Business Technology Transfer Act of 1992 while the SBIR program was reauthorized. Key innovations funded by SBIR/STTR include, the 23andMe genetic test, Lasik eye surgery, and Perseverance the Mars rover.

The SBIR/STTR program has had bipartisan congressional support for the most part. In 2000, the SBIR/STTR program was reauthorized for 9 years. However, when the time came to reauthorize SBIR/STTR in 2009, many continuing resolutions introduced in Congress led to a significant delay. The SBIR/STTR program was not reauthorized until the end of 2011, leaving a 2+ year gap between the previous and current reauthorization and a great deal of uncertainty.

Given the current SBIR/STTR lapse in 2026, what can innovation-based small businesses do now?

It seems like a situation like the one in 2009 could be happening now, as the SBIR/STTR lapse has been going on for over 2 months. There has not been much movement on reauthorizing the SBIR/STTR program, leading to many small businesses wondering if or when the program will be reauthorized. Nonetheless, the major question for small businesses is not “Is the SBIR/STTR program going to be reauthorized?” but “When will the SBIR/STTR program be reauthorized?” given the 43+ years of bipartisan support.

For now, small businesses can plan for alternative sources of funding for their R&D activities by looking into the federal agencies like the Department of War/DOW (previously known as Department of Defense or DOD), NIH, NSF, etc. for other non-dilutive grant opportunities. For example, the NIH offers a large number of grants that small businesses can apply for like R01, R21, R61/R33, and several others. Small businesses can also take advantage of grants.gov to search for federal funding opportunities that may be suitable for them. They can search for opportunities via grants.gov by typing in key words or selecting specific agencies that may align with the R&D they are performing. The Defense Advanced Research Projects Agency (DARPA) and the Advanced Research Projects Agency for Health (ARPA-H) programs also offer some non-dilutive grants for R&D. On the state level, funding programs like NC IDEA could be a good fit for most innovation-focused startups as long as they do not have a long pathway to commercialization. The NC Biotechnology Center offers a small business research loan (SRL) for life science and agtech companies that have demonstrated proof of concept, whether they received SBIR/STTR funding in the past or not. Aside from these funding opportunities, small businesses can look to private foundations as potential funding sources. 

If a small business is spinning out from a university or collaborating with one, perhaps opportunities like NCInnovation, the NC Biotechnology Center Translational Research Grant (TRG), and/or NSF Engines could be a good fit. Of course, these programs typically require universities to be the primary applicants and intellectual property holders. Small businesses could potentially serve as subcontractors and receive portions of these awards.

Joining a paid accelerator like Y Combinator, Techstars, and Masschallenge or raising a pre-seed/seed equity round could potentially benefit small businesses. Of course, they will need to consider how much equity they are willing to give up (if any) in exchange for $200K or more of R&D funding.

Bottom Line: Act; Don’t Wait!

A small business can 1) Apply for any of the non-dilutive funding opportunities mentioned above; 2) Consider paid accelerators, pre-seed/seed equity rounds, or both, and/or 3) Prepare key SBIR/STTR materials like 1-pagers for program managers and/or full proposals after identifying potential SBIR/STTR agencies of interest to the small business while waiting for SBIR/STTR to be reauthorized. The longer a small business waits for SBIR/STTR to be reauthorized, the less the small business can move forward.

We are here to help.

The SBTDC Technology Commercialization team is here to help navigate this difficult time. Please reach out to a counselor if you have any questions about the SBIR/STTR lapse or would like to discuss your fundraising strategy during this lapse.

---

Sources Used:

• Small Business Research Programs: Overview and issues for reauthorization in the 119th congress | Congress.gov | Library of Congress. 15 December 2025. https://www.congress.gov/crs-product/IF12874
• Impact. SBIR. (n.d.). https://www.sbir.gov/impact
• The History of the SBIR and STTR programs. SBIR. (n.d.-b). https://www.sbir.gov/tutorials/program-basics/tutorial-5#