Small business owners seeking for financing sources can turn to the federal government to kick start their business ventures. Every year, the government grants billions of dollars in the form of grants to small business owners, thus assisting them with research and development without the need of repayments.
To successfully apply and obtain the government grants for small business owners, you must review the grants you’re concerned with.
For instance, if your small business is involved in scientific research and development, you may be eligible for federal grants administered by the Small Business Innovation Research (SBIR) and the Small Business Technology Transfer (STTR) programs.
The SBIR program focuses on the entrepreneurial sector to support domestic small businesses to engage in Federal Research and Research and Development (R/R&D) that has commercialization potential. Through investment of federal research funds and awards-based program, SBIR safeguards small businesses and lets them compete on the same playing level as larger companies. SBIR offers monetary assistance to fund the startup and development stages of a business, as well as encourage commercialization of the brand’s product, service or technology. This effort is part of SBIR’s mission to build a strong American economy.
SBIR aims to:
- Fuel technological innovation
- Meet federal research and development standards
- Nurture participation in entrepreneurship and innovation by economically and socially disadvantaged individuals
- Improve commercialization of innovations resulting from federal research and development funding within the private sector
To qualify for the SBIR program, small business owners should be operating in the United States. SBIR beneficiaries must meet certain criteria as follows:
- Business must be for-profit and offices are located in the United States
- There should be no more than 500 employees, including affiliates
- Business must be more than 50% owned and controlled by one or more individuals who are U.S. citizens or permanent resident aliens in the country.
- Recipient may be owned and controlled by more than one venture capitalist, hedge fund or private equity firm given that no one such firm owns the majority of the stock.
- Phase I beneficiaries with multiple prior awards must meet the standard requirements for progress toward commercialization.
The SBIR Program includes three phases:
Phase I. This is to establish the feasibility, merit and commercial potential of the proposed research and development efforts and to identify performance quality of the small business recipient prior to providing further Federal support in Phase II. SBIR Phase I awards do not exceed $150,000 total costs for 6 months.
Phase II. This is to continue the research and development efforts put into Phase I. The amount of funding given is based on the results gained in Phase I and the scientific and merit and commercial potential of the project proposed in Phase II. Only Phase I recipients are eligible for a Phase II award. SBIR Phase II awards do not exceed $1,000,000 total costs for 2 years.
Phase III. This is where small businesses continue to pursue commercialization objectives resulting from the Phase I/II research and development activities. The SBIR program doesn’t fund Phase III.
STTR is a competitive small business program that helps in expanding funding opportunities in the federal innovation research and development field. The program’s core mission is to expand the public-private sector partnership to incorporate joint venture opportunities for small businesses and the country’s leading nonprofit research institutions. STTR’s key role is to encourage necessary innovation and advancements to meet the nation’s 21st century scientific and technological challenges.
Small businesses must meet certain requirements to be eligible in the STTR Program.
- Business must be American citizen-owned and independently operated
- It should be a for-profit business
- Key researcher need not be employed by small business
- Business size should not exceed 500 employees
The nonprofit research institution must also meet certain criteria for eligibility.
- It must be located in the U.S.
- May be a nonprofit postsecondary educational institution (college or university)
- Must be a domestic nonprofit research organization
- Must be a federally funded research and development center
The STTR is also structured in three phases:
Following submission of proposals, agencies make STTR awards based on small business/nonprofit research institution qualification, degree of innovation, and future market potential. Small businesses that receive awards then begin a three-phase program.
Phase I. This is the startup phase, where up to $100,000 is granted for approximately one year to help fund the exploration of the scientific, technical, and commercial feasibility of a technology, idea or project.
Phase II. In this phase, up to $750,000 is awarded to help expand the results gained in Phase I. Research and development activities are performed during this stage and the developer starts to consider commercial potential. Only Phase I award recipients are considered for Phase II.
Phase III. This is the stage during which Phase II innovation moves from the laboratory into the marketplace. This phase is not supported by any STTR funds. Small businesses must seek other financial resources in the private sector or other non-STTR federal agency to obtain the needed funding at this stage.