With the federal shutdown and the lapse in SBIR/STTR authorization as of Sept. 30, 2025, innovators who rely on federal awards may be facing unexpected uncertainty.
Whether you’re waiting on a pending award or managing an active project, it is a good time to evaluate your cash position and adjust your budget accordingly. Here are some tips.
1. Revisit your runway assumptions.
Start by mapping out your current cash position and your true “burn rate” — the amount you spend each month to keep your team and operations running. Then, model scenarios where expected reimbursements or new awards are delayed by 60 to 120 days.
Ask: What would happen if you received no new inflows for three months? Six months? Adjust your forecast accordingly and identify your emergency threshold, the point at which you’d need to cut discretionary spending or pause certain activities.
For example, “When our cash reserves drop below two months of operating expenses, we will suspend non-essential contracts until funding resumes.”
2. Reprioritize spending.
Focus on what matters most: your research, your patents, and your team. Defer or renegotiate less critical expenses such as travel, marketing, or contract labor.
If you have subcontractors, communicate openly about possible timing adjustments. Some companies even offer temporary “equity-for-service” or deferred payment options that can preserve liquidity.
3. Seek bridge or alternative funding.
During pauses in federal disbursements, non-dilutive bridge sources can help maintain momentum. For starters, consider state funding that mirrors SBIR objectives.
In Arkansas, for example, the Seed Capital Investment Program run by the Arkansas Economic Development Commission, provides early-stage technology-based enterprises in Arkansas with up to $500,000 in royalty-, equity-, or debt-based investments to help commercialize scientific/technological projects, much like SBIR/STTR does.
For Arkansas-based companies who have won a federal SBIR Phase I or Phase II award, you may be eligible for a discretionary matching grant. AEDC can match up to 50% of the federal award, with caps of $50,000 for Phase I grants and $100,000 for Phase II grants.
Other potential streams to investigate:
- University or foundation grants for proof-of-concept or prototype development
- Corporate partnerships that offer sponsored research or pilot funding
- Revenue-based financing if your technology is near commercialization
You may also want to talk with lenders who understand federal contract timing.
4. Build a financial contingency mindset.
Finally, use this period to institutionalize cash discipline. If you haven’t already, incorporate standard practices such as reviewing budgets monthly, maintaining a rolling 12-month forecast, and setting aside a minimum reserve goal.