SBIR and STTR phases explained: Phase I, II, IIB and III

SBIR and STTR fund small-business research and development in phases: a short feasibility project, a larger development award, and commercialization that the programs don't pay for. Each phase has its own purpose, length and ceiling — and the April 2026 reauthorization added a new, much larger award and new limits on how many proposals a company can send. Dollar figures here are current as of the review date above.

SBIR vs. STTR

Both programs fund small businesses. STTR adds a required partnership with a nonprofit research institution: at least 40% of the work must be done by the small business and at least 30% by the research institution.^[4] Under SBIR, the principal investigator must be primarily employed by the small business; under STTR, the PI may instead be primarily employed by the research institution.^[3] Agencies can be stricter — NSF requires an STTR PI to be employed by the small business at least 51% of the time^[9], while NIH lets the PI be employed by either partner.^[7]

The phases at a glance

Phase I: feasibility

Phase I tests whether the idea is technically sound and feasible. By SBA guideline it normally runs no more than 6 months for SBIR and 1 year for STTR, and agencies may allow longer.^[3] Examples: NASA Phase I lasts 6 months for SBIR and 13 months for STTR^[10]; NSF funds Phase I projects of 6 to 18 months for up to $305,000.^[9]

The SBA ceiling — $335,937 as of October 16, 2026 — is the most an agency can award without SBA approval; agencies can award more with a waiver.^[1] Individual agencies and institutes often set lower amounts in their solicitations, so the solicitation's figure is the one that applies to you.

Phase II: development

Phase II continues the R&D started in Phase I and normally lasts no more than 2 years. Unless an exception applies, only Phase I awardees can compete for Phase II.^[3] A company may receive one more sequential Phase II on the same project, and an SBIR Phase I can lead to an STTR Phase II, or the reverse.^[3] The ceiling without an SBA waiver is $2,239,578 as of October 16, 2026.^[1]

Direct to Phase II and Fast-Track

• Direct to Phase II lets a company that has already shown feasibility skip Phase I. The 2026 law extended this authority to September 30, 2031, added the Department of Energy and NASA to the agencies that may use it, and extended it to STTR.^[5] NIH now accepts Direct to Phase II applications under both its SBIR and STTR parent announcements.^[6][7]
• Fast-Track combines the two phases: at NIH, Phase I and Phase II are submitted and reviewed together as one application^[6]; NSF offers Fast-Track under NSF 26-510, starting with an invited Project Pitch.^[9]

Strategic Breakthrough awards (the new Phase IIB)

The Small Business Innovation and Economic Security Act (Public Law 119-83, April 13, 2026) created Strategic Breakthrough awards at agencies whose required SBIR spending exceeds $100 million.^[5] Under the law:

• An award can reach $30 million per company (including affiliates), over no more than 48 months.^[5]
• The company needs at least one prior Phase II award and at least 100% matching funds from new private capital or new non-SBIR/STTR government funding.^[5]
• At DoD, a program acquisition executive (or higher) must also commit to including the project in a DoD budget plan, and at least 20% of the match must be new DoD funding.^[5]
• Agencies must decide within 90 days of the proposal, and the authority runs through September 30, 2031.^[5]

NIH's version is the SBIR Phase IIB Strategic Breakthrough Award (PA-27-101): up to $30 million over at most four years, with a 100% third-party match.^[8] NIH's parent SBIR announcement no longer accepts Phase IIB competing renewals; Phase IIB applications go to PA-27-101 instead.^[6]

Phase III: commercialization

Phase III is work that derives from, extends or completes an earlier SBIR/STTR project but is paid for with other money — no SBIR or STTR funds are awarded in Phase III.^[2] There are no dollar or time limits, and agencies may issue Phase III awards, including sole-source awards, without further justification.^[4] SBIR/STTR data rights carry into Phase III, with a protection period of at least 20 years from the award.^[3]

Who can apply

• A for-profit business with a place of business in the United States, with no more than 500 employees including affiliates.^[11]
• More than 50% owned and controlled by U.S. citizens or permanent residents, or by other qualifying entities the Policy Directive lists.^[3]
• A Unique Entity ID from SAM.gov^[2], and registration in SBA's Company Registry, updated within the six months before you submit.^[3]

These are among the administrative checks that can get a proposal returned unread — SolicitFit checks them against each agency's rules (for example, NIH eligibility and registrations).

What the 2026 law changed

• Reauthorized through September 30, 2031.^[5] The programs' authority lapsed on October 1, 2025^[14] and resumed when the law was signed on April 13, 2026.^[5]
• Proposal caps from fiscal year 2027. Each agency must set a cap on how many Phase I and Direct to Phase II proposals a company may submit — per fiscal year, per solicitation or per topic — at least 90 days before the fiscal year starts.^[5] HHS already limits each company to nine new or resubmitted Phase I, Fast-Track and Direct to Phase II applications per fiscal year.^[13]
• Foreign-risk screening. Agencies must assess each applicant's security risk, using applicant disclosures and coordination with the intelligence community, and must deny applicants tied to the federal risk lists the law names.^[5]

With fewer proposals allowed per company, each one counts for more — another reason to catch administrative problems before you submit.

Benchmarks for frequent winners

Companies with many awards must meet two benchmarks. The Phase I-to-Phase II Transition Rate applies to firms with 21 or more Phase I awards in the past five fiscal years (excluding the most recent), which must average one Phase II for every four Phase I awards. The Commercialization Rate applies to firms with 16 or more Phase II awards in the past ten fiscal years (excluding the most recent two). A firm that misses a benchmark can't apply for Phase I or Direct to Phase II awards for a year.^[12]

Ready to apply? Check the SBIR/STTR deadlines and your agency's administrative rules.