SBIR & STTR Eligibility Guide — Who Can Apply (USA)
>50%
Owned & Controlled by US Citizens / Green Card Holders
500
Max. Employees incl. Affiliates
No Limit
On Revenue — Size by Employees Only
6 Months
Company Registry Update Cycle
Plain-language rules on the type of business, ownership and control, and the 500-employee size limit that a company must meet to receive SBIR or STTR funding — including venture-capital ownership, employee counting and affiliation.
- •Issued by: Government of the United States · U.S. Small Business Administration · SBIR/STTR Programs
- •Based on SBA Guide to SBIR/STTR Program Eligibility, updated September 2024
- •Issuing Agency: U.S. Small Business Administration (SBA)
- •Regulation: 13 CFR 121.702
Caution: This guide was updated in September 2024, before the SBIR/STTR reauthorisation of April 13, 2026. SBA states the guide has no legal effect — the regulation at 13 CFR 121.702 governs if there is any difference. Check the current regulation on ecfr.gov and any newer guide on sbir.gov before advising clients.
Why these rules exist
SBIR and STTR money is meant only for small, for-profit, independent US businesses. Every winning company must certify at the time of award that it meets three tests:
| Test | What it checks | Purpose |
|---|---|---|
| Type of firm | Must be a for-profit business | Fund businesses that want to turn research into a product |
| Ownership & control | More than 50% owned and controlled by US citizens / permanent residents (or businesses they own) | Make sure the funding builds innovation inside the US economy |
| Size | 500 employees or fewer, including affiliates | Fund small firms that find it hardest to get research money |
This guide covers only these three tests. Other rules — such as the minimum share of work the business must do itself — are in the SBIR/STTR Policy Directive and agency solicitations.
What kind of business can apply
- •For-profit business only — must meet the definition of a "business concern" in 13 CFR 121.105.
- •Non-profits are not eligible as applicants. They can take part only as the research institution partner in an STTR project.
- •Joint ventures — every partner in the joint venture must itself meet all the type, size, ownership and control rules. The only exception is an SBA-approved Mentor-Protégé joint venture (13 CFR 125.9).
Who must own and run the business
The Ownership Rule
More than 50% of the company's shares must be directly owned and controlled by one of these:
- •Individuals who are US citizens or US permanent residents (green card holders). "Individual" means a real person — not a company.
- •Other for-profit small businesses, each of which is itself more than 50% directly owned and controlled by US citizens or permanent residents. This includes a single VC, hedge fund or private equity firm that is itself such a small business.
- •Alaska Native Corporations, Native Hawaiian Organisations or Indian Tribes (or their wholly owned subsidiaries).
- •A combination of the above.
- •Multiple VC / hedge fund / private equity firms, as long as no single one owns more than 50% — SBIR only, and only at agencies using this special authority (see section 4).
How Ownership Is Counted — "Fully Diluted" Basis
SBA counts all shares that would exist if everything convertible were converted: common shares, preferred shares (as converted to common), warrants, and options already given to someone. Options not yet given to anyone are left out.
| Example (from the guide) | Fully Diluted Total |
|---|---|
| 50,000 shares + 10,000 shares authorised as stock options | 60,000 shares |
| 3 owners with 100 shares each + 100 warrants each | 600 shares |
| 60 preferred (1:1 convertible) + 30 common + options for 10 shares granted to employees | 100 shares |
Where Control Must Sit
Real control of the company must be inside the eligible ownership group. The company must be more than 50% controlled by one or more US citizens/permanent residents, one or more small businesses owned by them, or a combination.
- •If an Employee Stock Ownership Plan owns shares, each trustee and plan member counts as an owner.
- •If a trust owns shares, each trustee and beneficiary counts as an owner.
Important for Indian clients: shares held by Indian residents, an Indian company, or US visa holders do not count toward the eligible majority. More than 50% must be held and controlled by US citizens or green card holders (or businesses they own).
Can investors own the business?
Yes, in two situations:
| Situation | Allowed for |
|---|---|
| Majority owned by one or more investment firms that are themselves small businesses majority-owned by US citizens / permanent residents | SBIR and STTR, all agencies |
| Majority owned by multiple VC firms, hedge funds or private equity firms, with no single one owning more than 50% | SBIR only, at agencies using the "majority VC ownership" authority (Section 5107; 15 U.S.C. 638(dd)) — listed on SBIR.gov |
Definitions
- •VC operating company (VCOC): as defined in US Labor Department rules (29 CFR 2510.3-101(d)), or an investment company registered (or exempt with fewer than 100 owners) under the Investment Company Act of 1940.
- •Hedge fund / private equity firm: as defined in the Bank Holding Company Act of 1956, Section 13(h)(2).
- •US location required: the VC, hedge fund or PE firm must have a place of business in the US and be organised under US or state law. It cannot rely on an affiliate or subsidiary to meet this.
If an investor qualifies as an affiliate of the company (see section 7), its employees are added when checking the 500-employee limit.
Eligible and ineligible structures (Table 1 of the guide)
Shares in %. "Individuals" = US citizens/permanent residents. "SB" = small business owned by such individuals. "VC" = VC firm, hedge fund or PE firm. "Other" = large company, university, non-profit, etc.
Standard programme (agencies not using Section 5107)
| Ex. | Individuals | SB1 | SB2 | VC1 | VC2 | Other | Result |
|---|---|---|---|---|---|---|---|
| 1 | 60 | 30 | 10 | Eligible — individuals own over 50% | |||
| 2 | 20 | 20 | 20 | 20 | 20 | Eligible — individuals + small businesses own 60% | |
| 3 | 40 | 20 | 20 | 20 | Eligible — small businesses own 60% | ||
| 4 | 40 | 60 | Not eligible — one VC owns a majority | ||||
| 5 | 20 | 40 | 30 | 10 | Not eligible here — but eligible at a Section 5107 agency |
Agencies using Section 5107 (SBIR only)
| Ex. | Individuals | SB1 | SB2 | VC1 | VC2 | Other | Result |
|---|---|---|---|---|---|---|---|
| 6 | 50 | 50 | Eligible — multiple VCs, none over 50% | ||||
| 7 | 49 | 31 | 20 | Eligible — VCs together own 51%, none over 50% | |||
| 8 | 10 | 60 | 30 | Not eligible — one VC owns over 50% | |||
| 9 | 30 | 10 | 10 | 20 | 20 | 10 | Not eligible — no eligible majority of either kind |
The 500-employee limit
The company together with its affiliates must have no more than 500 employees. Size is measured only by employees — there is no revenue limit.
Who Counts as an Employee
- •Everyone employed full-time, part-time or on any other basis — part-time and temporary staff count the same as full-time.
- •Staff from temp agencies, professional employer organisations or leasing companies.
- •Not counted: unpaid volunteers (no pay and no in-kind benefit).
How to Count (13 CFR 121.106)
| Rule | Detail |
|---|---|
| Average over 12 months | Average number of employees per pay period over the last 12 completed calendar months |
| Add affiliates | Add the average employees of every affiliate — US and foreign |
| Acquired / acquiring firms | If an affiliation began during the period, count that firm's employees for the whole period |
| Former affiliates | Not counted at all if the affiliation ended before the date size is measured |
| New businesses (under 12 months) | Average over the pay periods since the business started |
Employees of foreign affiliates also count — an Indian parent or sister company's staff can push a US company over 500.
When another company is treated as part of yours
Two businesses are affiliates when one controls (or has the power to control) the other, or a third party controls both. Having the power is enough — it does not need to be used. SBA uses nine tests:
| Basis | When affiliation may be found |
|---|---|
| Ownership | Someone owns or can control more than 50% of voting shares; possible below 50% on the facts, less likely under 40%. If no one controls, the Board is treated as in control. |
| Options, convertibles, merger agreements | Treated as already exercised; mere talks about a possible merger do not count |
| Common management | The same people control the management or board of both businesses |
| Identity of interest | Family members in the same or similar business; or the company gets 70% or more of its receipts from one other firm |
| Newly organised concern | Officers or key people of one firm start a new firm (operating under 1 year) in a related field, and the old firm helps it with contracts, money or support |
| Joint ventures | All partners applying as a joint venture are affiliated (Mentor-Protégé exception applies) |
| Ostensible subcontractor | A subcontractor does the main, vital work or the company is unusually reliant on it |
| License agreements | A licence critical to the business — unless the licensee keeps the profits and bears the risk of loss |
| Totality of circumstances | SBA may find affiliation from all facts together, even if no single test is met |
Exceptions
- •Shared investors: the company is not affiliated with other portfolio companies of a VC, hedge fund or PE firm just because they share investors — unless that investor owns a majority of, or controls the board of, the portfolio company.
- •SBIC investment: investment from a Small Business Investment Company does not make the SBIC an affiliate (13 CFR 121.103(b)(1)).
Steps and timing
| When | What happens |
|---|---|
| Before applying | Register in the SBA Company Registry on SBIR.gov and receive an SBIR.gov Control ID. Print the proof of registration and attach it to every proposal. |
| Every 6 months | Update the Company Registry information so it stays accurate. |
| With the application | Some agencies ask for a certification that the business intends to meet all rules at award. Businesses majority-owned by multiple VC/PE firms must certify before applying. |
| At the time of award | After being told of the award and before receiving it, an officer of the business signs the eligibility certification (form in Appendix I of the Policy Directive and in each solicitation). |
| During the award | Recertify size when required — for example after a merger or acquisition, or if the award runs longer than 5 years (13 CFR 121.704(b)). |
| If protested | An SBA Area Office of Government Contracting can make a formal size determination and add the employees of any affiliates it finds. Owners may be asked to prove citizenship or permanent residence. |
Any intentional or careless false statement in the certification can lead to criminal, civil or administrative penalties.
Source
U.S. Small Business Administration, Guide to Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) Program Eligibility, updated September 2024; 13 CFR 121.702.
For advisory purposes only. The guide has no legal effect; SBA's regulations at 13 CFR 121.702 govern. This page does not reflect any changes after the April 2026 reauthorisation. Confirm current rules on ecfr.gov and sbir.gov before filing any application.