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The Government Might Fund Your Idea Before Anybody Else Will Competition for the money is fierce but the federal government allocates $2B a year in grants for early stage ideas few investors will touch.

By Kedma Ough Edited by Dan Bova

Opinions expressed by Entrepreneur contributors are their own.

In 2009, I decided to attend the National Small Business Innovation Research (SBIR) Conference to understand how the government could partner with businesses and support innovative ideas and technologies.

I was frustrated with the lack of capital available for small businesses. Most of the funds being promoted in the finance community were either debt financing requiring the repayment of a loan or equity financing requiring the business to give up a percentage of the profit in exchange for the necessary funding.

Related: Hidden Cash: Tap Into R&D Tax Credits

Sitting at the SBIR conference, I listened to agency after agency share their funding allocation for research and development. I couldn't believe that these agencies were willing to pay for the infancy stage of innovation and kept pinching myself to make sure I wasn't dreaming. That experience led me to host the 2012 national conference and introduce the opportunity for free research and development dollars to thousands of small businesses.

Here are the five key things to understanding the SBIR funding program.

1. The Small Business Innovation Research (SBIR) mission. The SBIR program, established in 1982, is focused on providing grants and contracts to small businesses with 500 employees or fewer in the development of a new concept. More than $2 billion is distributed annually to support early-stage concepts that need the necessary research and development to validate feasibility and compete in the global innovation marketplace.

2. The benefits of winning an SBIR grant or contract. There are several benefits to winning an SBIR grant or contract. The small business doesn't have to pay back the funds or give up a percentage of equity in the business. Any intellectual property is owned exclusively by the small business. Collateral or exceptional credit is not a requirement. In almost all cases, the goal of the program is to fund early-stage high-risk technologies, a completely different funding philosophy to standard lenders or venture capitalists.

3. The typical award size and success ratio. In a phase-one grant, the small business can receive a grant up to $150,000 for the initial research and development of the idea. Assuming the project is successful, the small business can apply for a second grant ranging up to $1 million over a two-year period.

Related: Take It for Granted

The average success ratio of a phase one grant is one in 10 applications reviewed. In phase two, it's one in five.

4. The type of topics that can be found in an SBIR solicitation varies. The SBIR program solicit topics through 11 federal agencies, including the Departments of Health, Defense, Education, Energy and Agriculture, the National Institutes of Health and many more.

Hundreds of topics are released quarterly, ranging from software system development, health-care solutions, online learning tools and clean energy.

5. Resources and information available about the SBIR. Tapping into the opportunity to apply for government grants begins with learning about the grants process. One of my favorite sights to research SBIR funding is the SBIR Gateway This site is filled with a lot of valuable SBIR information including solicitation dates, calendar of events and upcoming trainings in your area.

The SBIR program has provided hundreds-of-thousands of small businesses the opportunity to develop their concept in collaboration with the government in the pursuit of innovation.

Granted: Is Your Business Eligible for a Government Grant?

Kedma Ough

Entrepreneur, Inventor, Speaker; SBDC Director

Kedma Ough is a proven champion for small businesses. She is an inventor, author, speaker and a fifth-generation entrepreneur. Ough provides honest, straightforward education to innovators on feasibility,  funding and free resources. 

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