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Small Business Funding Mechanisms

Following is an overview on the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs and the Office of Dietary Supplements (ODS) contributions to these programs. To learn more about the SBIR and the STTR programs, visit:

What are SBIR and STTR Programs[1]?
SBIR and STTR are Congressionally-mandated set-aside programs for domestic small business concerns to engage in research and development activities that has the potential for commercialization. The SBIR program allows collaborations among research organizations; however, the STTR program requires the research and development activities to be conducted jointly by a small business concern and a non-profit US-based research institution. The NIH is among several federal agencies that participates in these programs.

Currently, ten Federal agencies participate in the SBIR program. These are: the Departments of Agriculture (USDA), Commerce (DOC), Defense (DOD), Education (DoED), Energy (DOE), Health and Human Services (DHHS), and Transportation (DOT); the Environmental Protection Agency (EPA), the National Aeronautics and Space Administration (NASA), and the National Science Foundation (NSF). 2.5% of each agency's extramural research and development (R&D) budget is set aside annually to fund the SBIR program. Currently, five Federal agencies participate in the STTR program. These are: DOD, DOE, DHHS (NIH), NASA and NSF. Federal agencies with extramural R&D budgets over $1 billion are required to administer STTR programs using an annual set-aside of 0.3%.

Objectives of the SBIR program include: 1) using small businesses to stimulate technological innovation; 2) strengthening the role of small business in meeting Federal R&D needs; 3) increasing private sector commercialization of innovations developed through Federal SBIR R&D; 4) increasing small business participation in Federal R&D and 5) fostering and encouraging participation by socially and economically disadvantaged small business concerns and women-owned business concerns in the SBIR program.

To participate in these programs, applicant small companies must be:

American-owned and independently operated
Located in the United States
Organized for-profit
Limited to 500 employees

What are the key differences between SBIR and STTR programs?
There are two key differences between the SBIR and STTR programs. First, the SBIR program stipulates that the principal investigator must have his/her primary employment with a small business when the award is made and for the duration of the project. Primary employment is not stipulated in the STTR program so the principal investigator may be from the partnering research institution or the applicant small business. Second, the SBIR program allows partnering, but the STTR program requires the small business to collaborate/partner with a non-profit research institution.

How are the SBIR and STTR programs structured?
The SBIR/STTR Programs are structured in three phases.

Phase I. In Phase I, the technical merit and feasibility of the proposed R&D efforts is established and the quality of performance of the small business awardee organization is determined. SBIR funding is normally $100,000 for six months and STTR $100,000 for one year. Applicants may request an adjustment in time or money to complete their project.

Phase II. Phase II projects are awarded for two years if Phase 1 is completed and successful; and at the level of $750,000 for SBIR and $750,000 for STTR. As with Phase 1, applicants may request an adjustment in time or money to complete their project.

Applicants are encouraged to contact the awarding Institute/Center Program Staff before requesting adjustments to Phase I and Phase II awards.

Phase III. Phase III allows small businesses to pursue commercialization of the products resulting from Phase I/II R&D activities using non-SBIR/STTR funds. For some small businesses, Phase III may involve follow-up on production contracts for products, processes or services intended for use by the U.S. Government.

What areas does the NIH fund?
The NIH welcomes applications from small businesses in the biomedical or behavioral research areas that fall within the mission of the NIH or any one of its Institutes or Centers. Applicants are encouraged to engage in dialogue with NIH Institutes and Centers before submitting an application to ensure that the area of interest matches that of the Institutes and Centers that may potentially fund the project. Applicants can visit the NIH Guide for Grants and Contracts and the Institutes and Centers websites at to learn about emerging interests and areas of high priority.

How does ODS participate in the SBIR/STTR programs?
As an Office ODS does not have direct granting authority, but it does provide research funding indirectly by collaborating with Institutes and Centers at NIH. Applications that are reviewed via the NIH review process and fall within the research priority areas of the ODS, can be sent by an Institute or Center to the ODS for consideration to co-fund a project with that Institute or Center. The ODS also funds projects directly through other mechanisms such as cooperative agreements, interagency agreements and contracts, to meet its goals.

The mission, goals, and programs of ODS can be viewed at: This website also provides a listing of projects co-funded by ODS between 1996 and 2002.

For additional information on the
NIH SBIR/STTR programs go to:

October 1, 2003

1. The SBIR program was established under the Small Business Innovation Development Act of 1982 (P.L. 97-219), reauthorized until September 30, 2000 by the Small Business Research and Development Enhancement Act (P.L. 102-564), and reauthorized again until September 30, 2008 by the Small Business Reauthorization Act of 2000 (P.L. 106-554).
The STTR program was established by the Small Business Technology Transfer Act of 1992 (Public Law 102-564, Title II), reauthorized until the year 2001 by the Small Business Reauthorization Act of 1997 (P.L. 105-135), and reauthorized again until September 30, 2009, by the Small Business Technology Transfer Program Reauthorization Act of 2001 (P.L. 107-50).