The Application To participate in the SBIR/STTR programs, a small business must exhibit these qualities: American owned with 51% or more ownership by an individual For profit company with no more than 500 employees Principal investigator/ researcher employed by the small business or by the research institution for the STTR program For a qualifying company, the benefits are signficant: No repayment of grant money The small business retains intellectual property rights. Grant money can be used as match funds for MTI development awards. A Three-Phase Program Phase I Determines feasibility. Agencies award grants up to $100,000 for a six- to nine-month SBIR project and one-year STTR project that explores the technical merit of an idea or technology. Applicants must submit a 25-page proposal in response to a specific agency topic. The proposal must articulate objectives, significance of the innovation, scope of work, and applicant qualifications. Phase II Develops a Prototype. Agencies award grants up to $750,000 for a two-year project that builds on the results of Phase I. The project features research and development and an evaluation of commercialization potential. Only Phase I awardees are considered for Phase II for which applicants must submit a 50-page proposal. Phase III Transfers innovation from the work bench to the marketplace. No SBIR/STTR funds support this phase, so an entrepreneur must pursue capital from the private sector or funding from other non-SBIR/STTR federal programs. Auburn Machinery used an SBIR Phase I award from the USDA to develop ways of recovering and reusing wood waste in lumber mills.