SBA grant programs set to expire get 11th-hour reprieve

Federal grant programs that have been called vital to small-business innovation got an 11th-hour reprieve on the eve of their expiration last week when Congress passed a stop-gap measure to continue them through September.

The long-term reauthorization of the Small Business Administration programs has stalled for years despite bipartisan support for the initiatives due in part to sticking points on which companies ought to be eligible and how much money should be put on the table.

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The most popular programs, Small Business Innovation Research and Small Business Technology Transfer, require federal agencies to set aside a portion of their budget for grants to small businesses. An SBA spokesman said the programs attracted applications from 28,000 businesses for nearly $2.5 billion in funding in fiscal year 2009.

Nevertheless, the programs have not been fully reauthorized in recent years, creating an uncertain funding climate for businesses that often rely on outside support to bring new technologies to market. The bill passed last week still requires the president’s signature.

Biotechnology firms are the recipient of many grants due to the wealth of money flowing out of the National Institutes of Health. The eligibility of many firms took a hit in the early 2000s, however, when the SBA decided to exclude companies with majority venture backing.

“Our industry has such a huge timeline for development that it takes significant venture investment to get through the clinical trial process, so by including a rule like that you exclude a large number of biotech companies,” said Mark Herzog, executive director of the Virginia Biotechnology Association.

He said the programs’ uncertainty has created additional headaches in Virginia, where legislators this session passed matching grants for life sciences firms that receive federal money as part of the programs. If the programs were to expire it might stymie the state’s efforts as well, he said.

The Biotechnology Industry Organization, a District-based trade group, is advocating for reforms that would make majority venture-backed biotech firms eligible for a portion of the federal grants, said Alan Eisenberg, executive vice president of emerging companies and business development.

“What we advocate for is simply the opportunity for biotech companies that have majority venture backing to compete for federal dollars and let the scientists at the National Institutes of Health make the determination of who has the best science,” he said.

SBA spokesman Dennis Byrne said the SBA grant programs have continued uninterrupted during the debate, and that agencies continue to follow protocol.

But Larry Nannis, chairman of the National Small Business Association, an industry group, said that short-term extensions, rather than a multi-year reauthorization, have led to inconsistency for businesses that may require years of sustained financial support.

“If [as a federal agency] I’ve got a program that is only lasting four months at a time and you’ve got a technology that’s going to take two years to develop . . . I’m having a difficult time figuring out what I can and should give out to these small businesses,” he said.

Last week’s legislation gives Congress an additional four months to debate the matter and craft a solution. Bills currently in the House and Senate are under review and observers said they’re hopeful one will be passed before the fiscal year’s end.

“There have been a couple of times when we hoped things could get done and the can got kicked down the road, but I’m eternally optimistic,” Eisenberg said.