The growth, stability, and general health of small businesses are keys to turning the tide on America’s economic woes. Both Republicans and Democrats share common ground on this one point. However, crucial government funding will soon expire, leaving a significant amount of small business jobs, funding, and innovative spirit hanging in the balance. This end will have a resounding effect on three fronts:

  • Job Loss
  • Critical Funding
  • Loss of Innovative Spirit

Job Loss

At a time when unemployment and job creation is paramount for Americans, Congress is on course to cut billions in funding for research and development projects, of which 2.5% were dedicated to small businesses. A devastating blow will be dealt to companies without the capital to retain the PhDs and engineers that keep their R&D projects functioning. Successful programs and employees have stimulated high-tech innovation and further helped meet the government’s research and development needs.

Employment opportunities have been created and funded by small business R&D grants. These R&D projects will inevitably be forced to shut down and let go of invaluable workers. To be fully operational and effective, staffs, resources, and facilities are needed which are beyond a small business’s means. The SBIR (Small Business Innovation Research) and the STTR (Small Business Technology Transfer) are the two government programs that have done most of the funding in the federal innovation research and development arena.

Critical Funding

America has a history of encouraging and supporting its small business entrepreneurs in the technological advancement of many industries. Currently, eleven federal agencies benefit from SBIR and STTR programs, including the departments of defense, education, and homeland security.

Ever since 1982’s Small Business Innovation Development Act, the government has funded research and development projects by small businesses in excess of 26 billion dollars. The most recent extension of this bill expires on September 30, 2011. The expiration will not only be an untimely end for many small business employees, but also an end to valuable projects that may be on the cusp of ground-breaking advances.

Loss of Innovative Spirit

Jobs developed through small business research and development may end, but so will the innovation that they would foster. A lot of great companies would not exist if it weren’t for SBIR grants. Small business entrepreneur and blogger “Out-innovate” tells of his own ability to successfully build several businesses with the help of SBIRs.

“. . . without the government support, it would have never happened—regardless of how smart the team, how good the idea, or how large the market.”

Since many small businesses are sources of the most innovative research and development, it’s imperative that they receive the necessary funding to continue. Large corporations tend to have the capital to finance such projects. However, they lack the entrepreneurial spirit that thrives on its ingenuity and pioneering results.

The biggest concern for the ceasing of government funding is that SBIR and STTR programs may never return. Small business’ invaluable contributions would be gone with them. Once there is a cut made, it’s easier to lose focus on the value of the program when up against a litany of critical needs. Alex Laats, a general partner at venture capital firm Commonwealth Capital Ventures expounds.

“There’s always something more pressing that comes first before small businesses.”

Small businesses interest groups have not been able to rally in the 11th hour, like they’ve done numerous times since 2008. Rick Shindell, technology consultant and publisher of SBIR Insider, states “there’s fatigue this time around.” The cuts seem to be imminent, and will be felt by small business researchers and developers in the short and long term.