# SBIR and non-dilutive grants

> Federal research awards in phases, with no equity taken — and why they are tracked apart from the R&D credit.

Source: https://lopifi.com/learn/ways-to-raise-startup-capital/sbir-and-non-dilutive-grants
Part of: Lopifi — US GAAP books on autopilot, checked by a CPA (https://lopifi.com)

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**What are SBIR grants, and can a startup use them instead of raising?** Federal research awards in phases, with no equity taken — and why they are tracked apart from the R&D credit.

The [SBIR](https://lopifi.com/md/glossary/small-business-innovation-research) and STTR programs are federal research funding: participating agencies award small businesses money to develop technology the agency wants, in phases, and take no equity. SBIR.gov describes it as "equity free funding". SBIR.gov states that, as of October 16, 2026, an agency may issue a Phase I award of up to $335,937 and a Phase II award of up to $2,239,578 without SBA approval. Eligibility rules — size, ownership, the research itself — are in the SBA's policy directive, linked from SBIR.gov.

> “SBIR provides equity free funding through federal agencies to American small businesses.”

— [SBIR.gov, About](https://www.sbir.gov/about), SBIR and STTR: non-dilutive federal research funding

> **A grant is not the R&D credit.** An SBIR award funds research an agency chooses; the research credit reduces tax on research the company chose. Research funded by someone else is generally not qualified research for the credit, so the two have to be tracked apart — see [the R&D credit track](https://lopifi.com/md/learn/what-is-the-rd-tax-credit).

**SBIR / STTR**
- Pro: No dilution and no repayment
- Pro: Validates technical risk for later investors
- Pro: Phase II awards can be large
- Con: Months from proposal to award
- Con: The work must fit the agency's topic, and the reporting is real
- Con: Not available for most software or retail businesses
- Best for: Deep-tech, defense, health and science companies whose roadmap matches an agency topic

## Where this page's rules come from

- [SBIR.gov, About](https://www.sbir.gov/about) — SBIR and STTR: non-dilutive federal research funding (agency)

- **Track:** [Cap tables & raising](https://lopifi.com/md/learn/equity)
- **Part of:** [Ways to raise: SAFEs, notes, priced rounds, debt and grants](https://lopifi.com/md/learn/ways-to-raise-startup-capital) — 3 min
- **Terms taught:** [Small Business Innovation Research](https://lopifi.com/md/glossary/small-business-innovation-research)
- **Previous:** [Revenue-based financing](https://lopifi.com/md/learn/ways-to-raise-startup-capital/revenue-based-financing)
- **Next:** [Friends and family money](https://lopifi.com/md/learn/ways-to-raise-startup-capital/friends-and-family-round)
- **The course:** https://lopifi.com/md/learn