Congress Passes Bill to Unfreeze Billions in Small Business R&D Funding  

On March 17, the U.S. House of Representatives passed the Small Business Innovation and Economic Security Act, which would reauthorize the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs through September 2031. The bill has already cleared the Senate. According to an analysis by law firm Goodwin, the legislation now awaits President Trump’s signature, though there is a catch. Trump has said he will not sign any bill until a separate piece of legislation, the SAVE America Act, passes both chambers of Congress. That bill has cleared the House and is currently under debate in the Senate.

The SBIR and STTR programs are the government’s main tools for seeding early-stage research at small businesses. Think of them as the federal government’s venture arm for startups. Agencies like the Department of Defense, the National Institutes of Health, and the Department of Energy collectively funnel hundreds of millions of dollars each year into these programs. The money flows in stages: first to prove a concept works, then to develop a prototype and finally to help bring it to market.

The new law would introduce a significant change: a funding category called Strategic Breakthrough Awards. These grants could be worth up to $30 million each and are specifically designed to help companies cross what insiders call the “valley of death,” which is the perilous gap between proving a technology works and actually manufacturing and selling it. To qualify, a company would need to have already received prior SBIR or STTR funding, match 100% of the award from outside sources, and demonstrate real commercial demand. Defense-focused companies face additional requirements.

Per Goodwin, “Small businesses and startups that have validated their technology with government R&D funding have historically struggled to secure the bridge capital needed to manufacture at scale, hire employees and sustain a growing workforce, and meet the regulatory requirements imposed by the federal government,”

The bill also has a harder edge. Companies with ties to certain foreign entities would be barred from receiving awards altogether. The prohibited connections span several government watchlists, including the Commerce Department’s Entity List and the list of Chinese Military-Industrial Complex Companies. Agencies would also gain broad discretion to reject applicants based on a security review that examines cybersecurity practices, foreign ownership, financial ties, and the outside activities of key executives and board members.

There are also housekeeping changes. Agencies would be required to cap the number of proposals a single company can submit each fiscal year, a response to complaints that some firms were flooding reviewers with applications across dozens of agencies and topics. Greater public reporting on the types of awards being made would also be required.

What happens next depends largely on the Senate. The SAVE America Act must pass before Trump puts pen to paper. Under the Constitution, a bill can also become law without a presidential signature if Congress remains in session and the president takes no action within 10 days.

Goodwin advises companies not to wait. Firms should begin documenting their technology’s commercial readiness, assessing their ownership structures for any foreign connections, and preparing for new limits on the number of proposals they can submit. Once the programs reopen, federal agencies are expected to move quickly, and the competition for that first wave of new awards is likely to be intense.