NIH & NSF SBIR Phase I & II Budget Limits Plan Your Non Dilutive Funding Budgets for 2023

So as we begin a new year, let's talk about the SBIR budget funding limit for NSF and NIH in 2023. Hey guys, welcome back to the channel. I'm Stacy Chin from keepyourequity.co, and our goal is to help startup founders just like you secure non-dilutive SBIR and STTR grant funding so that you can bring your innovations to the commercial market. So after consulting hundreds of startups, one of the trickiest parts of the SBIR application is the budget. So I have had many founders ask me, how do I even put together a budget? And there are specific rules and regulations that you have to abide to when preparing for your budget, depending if you're going for a Phase 1 or Phase 2 SBIR, and depending which federal agency you're applying to as well. So to give you some clarity, in this video I'm going to give you some high-level insights as to how you can break down your Phase 1 or Phase 2 SBIR budget. This advice can apply to many different federal agencies. I'm just going to talk about the NIH and NSF budgets for 2023 in this video. But when preparing for your SBIR budget, you want to make sure you read the solicitation carefully so you can catch any new updates or considerations when preparing for your SBIR application. And if you stick to end of this video, I'm going to tell you about the budget funding limits that you have to keep in mind whether you're applying for an NSF or NIH Phase 1 or Phase 2 in 2023. So before I jump into it, make sure you like and subscribe to this brand new channel so that you won't miss any tips and tricks on how you can secure non-dilutive SBIR and STTR funding without giving away any equity from your startup. So despite whatever phase or agency you're applying to, there are 3 main budget categories that you have to keep in mind, and that is the direct costs, indirect costs, and small business fee, or also known as the profit. So now let's talk about each of those categories in more detail. The direct costs are any costs associated to carrying out your proposed research in your SBIR application. So usually, to know what are your direct costs, I would first hammer out the details of what you want to propose, and then we're going to figure out what are the direct costs associated with those proposed aims. And based on that, you can figure out what are the costs necessary in order to carry out those specific aims or technical objectives. So what type of expenses can be considered as direct cost. So direct costs can include any labor, such as the principal investigator or the senior key personnel or scientists and engineers that are carrying out the proposed efforts. Direct costs can also include fringe benefits and materials or supplies that are necessary for the proposed efforts. They can also include domestic travel, publication or documentation costs, subcontractors, consultants, subawards, along with other things as well. The second category are your indirect costs, and these costs are the necessary expenses you need in order for your business to operate, but they might not be directly directly related to your proposed efforts. So in other words, you can consider your indirect costs to be general and administration expenses that you will need to run your business in order to carry out the proposal. And those costs can include rent, electricity, overhead, mail, and some legal counsel as well. And typically, these indirect costs are calculated based on a percentage of your total direct costs. So for academic universities, typically these rates have to be negotiated with the federal agency. However, for startups that don't have negotiated rates, these are the typical guidelines you can follow to calculate your indirect cost. So startups can claim up to 50% of the total salary and wages within your direct costs of the project, or 10% de minus on the modified total direct cost for a Phase 1 or Phase 2 application. However, if you're applying for a Phase 1 or Phase 2 to the NIH, or the National Institute of Health, startups can claim up to 40% of their total direct cost as their indirect cost budget. So for example, if a startup is applying for a Phase 1 SBIR to the NIH and their total direct cost equals up to $100,000, that means the startup can claim up to 40% or $40,000 as their indirect cost budget in their application. However, it is important to note that startups can claim a lower rate as their indirect cost in their application, but whatever you do, you do not ever want to exceed these percentages since that can lead to a disqualification. Now the last category is the small business fee, or sometimes known as the profit, and this is actually my favorite budget category. So according to the NSF, the small business fee is intended to be a fee that is consistent with the normal profit margins provided to profit-making companies that are doing R&D work. And the cool thing is, this small business fee is not considered as a direct or indirect cost budget line item, so startups can use this fee for any purpose, including additional efforts under the award. The small business fee can also be used for expenses that may be considered as ineligible or prohibited underneath the SBIR award, and some of these examples are foreign travel, some equipment, or patent filing costs. If you're unsure what type of expenses can be considered as ineligible or eligible, make sure you read the solicitation carefully or ask the program officer for clarification. So for startups, the small business fee is typically calculated based on a percentage of your total direct and indirect costs. So for the National Science Foundation, startups can claim up to 7% of the total direct and indirect costs for a Phase 1 SBIR, and this increases to 10% if you're going for a Phase 2 to the NSF. Now, if you're going for a Phase 1 or Phase 2 to the NIH, startups can claim up to 7% of the total direct and indirect costs as their small business fee. So now let's revisit our example of a startup applying for a Phase 1 application to the NIH. So if this startup is proposing a total direct cost of $100,000, which means they can ask up to $40,000 for the indirect costs, and that equals to a total of $140,000. Now the startup can claim up to 7% as their small business fee of the $140,000 total which equals to $9,800. And again, with a small business fee, you can always propose a lower rate. But whatever you do, you do not want to exceed the proposed rates, or else that might lead to a disqualification. So now with that, I know you're begging for the answer to the huge question: what are our budget funding limits for 2023? Well, here you go. So for NSF in 2023, if you're applying for a Phase I SBIR grant, you can propose up to $275,000 in total funding for a proposed 6 to 12 month research project. And if you're going for a Phase II SBIR to the NSF, you can propose up to $1 million of total funding for a proposed project period of 24 months. Now, if you're applying for the NIH in 2023 for a Phase I SBIR application, you can propose up to $295,924 in funding for a proposed project period of 6 to 12 months. Now, if you're applying for a Phase II application to the NIH, you can ask for a total project budget of $1,972,828 for a proposed project period up to 24 months. Now, it is important to note that these numbers are all inclusive of your direct costs, indirect costs, and small business fee. Going over these budget limits is just not a good idea for your application, but there are some instances where you can go over the limit. For example, if you're going for an NIH SBIR and you have a budget waiver, if want me to do a video on explaining budget waivers and how you can go about this, leave that in the comments below. Another tip to keep in mind: if you're preparing a budget for a Phase 2 SBIR application, you want to make sure you break down your year 1 budget from your year 2 budget, since that's how you're going to input these numbers in your eRA Commons or ASSIST for the NIH, or in Fastlane for the NSF. So those are my tips and tricks of how you can prepare your SBIR budget, whether you're going for a Phase 1 or a Phase 2 to the NIH or the NSF. Thank you so much for watching to the end of this video. Please don't forget to like and subscribe. Also, please leave a note in the comment section below of any other questions you might have when preparing for your SBIR budget. And make sure to check out our website at keepyourequity.co, where you'll find lots of new resources and tips on how you can secure your non-dilutive funding so that you can keep your equity throughout your fundraising journey. And with that, I'll see you in a video very soon.