Federal Research Funding Hikes: SBIR/STTR Reauthorization Boosts Small Business R&D Spending to 7% by 2032

The SBIR/STTR Reauthorization Act of 2025 is essentially a massive renewal and expansion of the federal government’s primary programs for funding small business research and development (R&D). The Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs are the government’s way of tapping into private sector innovation, and this bill keeps them running until 2030 (SEC. 101).

But this isn't just a simple extension. The core change here is a significant, mandated increase in how much money federal agencies have to set aside for these small business programs. By 2032, agencies will have to dedicate at least 7 percent of their eligible R&D budgets to SBIR, up from the current rate, and 1 percent to STTR (SEC. 201). Think of it like this: if you run a small tech company, the pool of federal cash available for you to innovate just got a whole lot deeper over the next decade. For those agencies, like the Department of Defense or NASA, this means a serious budget shuffle to meet these new, higher minimums.

The Golden Ticket: More Cash, More Commercialization

This bill is laser-focused on moving technology out of the lab and into the marketplace—what the policy world calls “commercialization” (Title III). Agencies must now appoint a Technology Commercialization Official whose job is literally to guide award winners through the tricky process of turning a research grant (Phase I/II) into a marketable product or service (Phase III) (SEC. 302). This means if your small business wins an award, you get a dedicated point person inside the agency to help you land the bigger, follow-on government contracts.

Another major win for small businesses is the overhaul of Technical and Business Assistance (TABA). Right now, agencies often dictate who provides this help. Under the new rules, if you win a Phase I or Phase II award, you get to choose your own TABA vendor. You can even use the funds—up to $6,500 for Phase I and $50,000 for Phase II—to train your own internal staff, hire new employees, or get specialized cybersecurity help (SEC. 204). This gives small businesses real flexibility instead of being stuck with an agency-approved consultant who might not understand their specific needs.

Spreading the Wealth and the Talent

The reauthorization is also trying to fix the problem of R&D funding being concentrated in a few wealthy states. The bill mandates enhanced outreach and application assistance specifically for businesses in states that haven't historically received many awards (SEC. 203). This is a big deal for entrepreneurs in regions often overlooked by federal R&D dollars.

Additionally, the bill creates new SBIR/STTR fellowships and internships at the undergraduate, graduate, and postdoctoral levels. Agencies are required to actively seek out women, socially disadvantaged, and economically disadvantaged individuals for these paid positions (SEC. 202). For a student or recent grad looking to get into cutting-edge R&D, this creates a new, federally funded pipeline for work experience.

The Catch: Security and Oversight Changes

While most of the bill is about expansion, there are important new security checks (Title V). The bill codifies safeguards to prevent small businesses that are majority-owned by venture capital or private equity firms from getting SBIR awards if they are ultimately controlled by a “covered foreign entity” (SEC. 505). This is a national security measure designed to keep critical American technology out of the hands of foreign governments of concern. The definition of “covered foreign entity” is extremely broad, and while necessary, it could create compliance headaches and uncertainty for investment-backed firms with international funding sources.

Finally, the bill makes a curious change to oversight: the required report detailing how quickly agencies process and award grants (award timeliness) is being changed from every three years to every eleven years (SEC. 503). While the report will now include more detail on average processing times, reducing the frequency of this specific oversight check means agencies get a much longer leash on their efficiency, which might raise an eyebrow for those who rely on timely funding to keep their projects afloat.