The SBIR program began in 1982 and was designed to help small U.S. businesses stimulate technological innovation benefiting the government, military, and economy. SBIR grants aren’t scarce – there’s plenty of money to go around.
All federal agencies with research and development budgets over $100 million are required to invest 3.2% into the SBIR program. While eleven federal agencies participate in the SBIR program, most grant opportunities are provided by the following departments:
- The Department of Defense (DoD)
- The Department of Health and Human Services (HHS)
- The Department of Energy (DoE)
- The National Aeronautics and Space Administration (NASA)
- The National Science Foundation (NSF)
If you’re looking for non-dilutive funding, grants are one of the best sources of funding for your business if you’re in the research and development phase. The scientific scope of grants allows much more innovative freedom than contracts.
Of the agencies listed above, the National Institutes of Health (HHS) awards the most grant funding of any agency – by far! However, SBIR grants have strict spending requirements, so before you get too far along in the application process, consider the following.
1. Does Your Business Legitimately Qualify For The SBIR Grant?
When it comes to the SBIR grant, your business must meet specific and strict qualifications. According to the official SBIR website, there is a multitude of eligibility requirements:
- Qualify as a Small Business Concern (SBC) as defined by SBA regulations. These regulations include that a business must be organized for profit, operate primarily within the U.S. (or significantly contribute to the U.S. economy), have legal standing as some kind of business entity (LLC, corporation, partnership, etc.), and more. You must self-certify at the time of award that your company meets the SBC definition and is eligible.
- Be a for-profit business. Non-profit organizations are not eligible for the SBIR award.
- Have an EIN/TIN. Your business must be federally registered to receive the SBIR award.
- Have 500 or fewer employees. This grant is for small businesses only.
- Respond to existing solicitations. Your proposal must be a response to a solicitation published by a participating agency. No unsolicited proposals will be accepted.
Make sure you meet these qualifications before applying for any particular project.
2. Are You Ready To Track Expenditures In Detail?
A government grant comes with strings attached, and you must play by all the rules. According to expert CPAs at Jameson & Company, accounting rules for grant expenditures are strict. You will need to report all direct and indirect costs incurred at the end of your project on a specific form (FSR 269).
Unspent funds must be returned to the NIH, and you must absorb all overspending. The only way to meet these requirements is to track expenditures to the penny as you go along. Here’s where tracking gets complicated.
It’s not sufficient to use an Excel spreadsheet to track everything related to a grant. You need an accounting system that is compliant with the Federal Acquisition Regulation. Otherwise, you could make mistakes that will require you to forfeit or pay back your grant.
3. Submitting A Proposal That Strays From Your Business’ Core Goals Can Backfire
When you need funding, it’s easy to compromise your goals to fulfill the requirements that will award you the money. Although it’s natural, it’s also a bad idea. Trying too hard to get into the SBIR program can cause you to lose focus on your business. You might end up wasting precious time that could have been spent developing your business according to your vision.
4. You’ll Need Plenty Of Patience
The SBIR program is a long-term commitment. It’s not a grant you can receive as a check and then go off to do your own thing. SBIR awards are given in three gated phases. A Phase I award can take between 6-9 months; a Phase II award can take two years, and a Phase III award can take up to 8 years. The total time from proposal to the end of Phase II can be up to 4 years.
In Phase II, you’ll be working with the government to commercialize whatever technology you’ve been working on. This can be the most challenging aspect of the program. To get through the phases, you need plenty of patience and a wholehearted commitment to your goal.
Don’t Let The Requirements Scare You Off
Although the requirements are strict, don’t let them deter you from applying for a grant. If you legitimately qualify for the SBIR program, there’s no reason not to pursue a grant.
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