If you’re a small business pursuing federal research funding, 2025 has likely felt like a rollercoaster. With delays, terminations, and shifting priorities, it’s more important than ever to be strategic. Here are five key recommendations if you’re planning to apply for SBIR or STTR funding in the second half of the year:
1. Apply for multiple opportunities
Don’t put all your eggs in one agency’s basket. Agencies are still obligated to distribute SBIR/STTR funds, so increase your chances by applying widely. Collaborate with universities or businesses to broaden eligibility and proposal strength.
2. Anticipate shifting priorities
Be ready for changes in solicitation topics and review criteria. Focus your proposals on strategic national interests like defense, domestic manufacturing, and fast commercialization. Avoid buzzwords or themes that may attract additional scrutiny.
3. Budget wisely and flexibly
Ensure your company can operate efficiently even if indirect cost rates change. Lean budgeting and creative categorization—like shifting facility costs to direct expenses—can make your proposal more competitive and resilient.
4. Expect more screening
Beyond scientific merit, expect heightened pre-award review of security risks, foreign involvement, and certain social themes. Agencies are under pressure to be more selective. Be clear and transparent in your disclosures.
5. Be persistent with program officers
Agency staff have been in flux, and response times may lag. Reach out early, and don’t hesitate to follow up with other contacts in the program office if you don’t hear back. Relationships matter.
What’s Been Happening in 2025? A Quick Recap of SBIR/STTR Developments
This year has brought major disruptions for SBIR/STTR participants across the country:
Funding freezes and processing delays
A January-wide federal pause affected many grant payments and review panels. While most issues have since been resolved, agencies like NSF and NIH had to delay or re-review grant applications.
Grant terminations—mostly outside SBIR/STTR
Over 2,900 federal grants totaling nearly $3 billion have been terminated—especially those involving DEI or climate-related topics. Fortunately, only a handful of SBIR/STTR awards have been cut (5 from NIH and 8 from NSF).
Uncertain indirect cost limits
A proposed 15% cap on indirect costs has not yet gone into effect due to ongoing legal challenges. Some agencies still advise budgeting conservatively while awaiting clarity.
Tax law changes still unresolved
The tax treatment of R&D expenses under Section 174 remains a problem for many small businesses. While new legislation has been introduced to allow immediate expensing again, nothing has passed yet.
SBIR/STTR programs up for reauthorization
The programs are set to expire at the end of September unless reauthorized by Congress. While historically reauthorized without issue, two competing bills have been introduced—one proposing permanent authorization and expanded funding, and another calling for limits and structural changes. Businesses should monitor developments, as changes could impact future award structures and eligibility.
Looking Ahead
While 2025 has introduced uncertainty, it’s also created space for opportunity. Agencies remain committed to awarding SBIR/STTR funding, and businesses that stay proactive and adaptable are still well-positioned for success.
Source: North Carolina Small Business Development Technology Center, https://sbtdc.org/blog/sbir-sttr-program-2025-news-and-updates
