Why It Matters

The House Small Business Committee held a hearing on June 25, 2026, to examine the federal government's role in funding startup growth. Joshua Carter, the U.S. Small Business Administration's (SBA) top investment official, defended programs that have distributed billions to small businesses but face new scrutiny under the Trump administration. The hearing highlighted tension between Republicans and Democrats over budget cuts and program disruptions affecting early-stage companies.

The Big Picture

The hearing comes as the SBA's Office of Investment and Innovation navigates significant disruptions. TheSmall Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs, which distribute approximately four billion dollars annually across eleven federal agencies, experienced a nearly four-month lapse in authority before reauthorization. Congress passed the Small Business Innovation and Economic Security Act in March 2026, and the programs were reauthorized through September 30, 2031.

The backdrop includes broader changes to federal startup funding. A 33% budget cut, cancellation of longstanding innovation programs, and regulatory overhauls have left the SBA in flux as Congress prepares to examine how it allocates resources and manages capital access for small businesses. The hearing was designed to establish a congressional record regarding recent disruptions and clarify lawmakers' intentions for the Office of Investment and Innovation's future.

The Small Business Investment Company (SBIC) program, established in 1958, has historically operated at zero subsidy cost to taxpayers for more than 20 years and maintained a near-zero default rate over the past five years. In fiscal year 2025, the program closed with a record 53 billion dollars in combined private capital and SBA leverage. The SBA approved 48 new SBIC licenses and issued a record 88 green light letters in fiscal year 2025, with the pipeline projected to drive approximately 27 billion dollars in new private sector investment.

What They're Saying

Carter testified that the SBA's Office of Investment and Innovation serves as a bridge between early-stage small businesses and the capital and technical resources they need to grow and scale. He recommended strengthening and reauthorizing the SBIR/STTR programs while reducing administrative burden on applicants, modernizing the SBIC program to better leverage private capital, and expanding outreach to underserved communities and geographically diverse regions that have historically received fewer awards.

The Small Business Investor Alliance characterized the SBIC program as "one of the most successful, effective tools the federal government has available to drive more capital to areas that need it most." According to a nonpartisan think tank, SBIR/STTR programs are uniquely positioned to bridge the "valley of death" between lab research and commercial viability.

Recent legislation increased SBA leverage limits for SBIC funds, allowing significantly more private capital to flow into American small businesses. For many SBIC funds, higher leverage limits can translate into nearly 200 million dollars in additional investment capacity. The legislation also provides up to 125 million dollars in additional leverage for SBIC funds investing in critical technologies, rural communities, and small manufacturers.

The SBA removed regulatory barriers to facilitate SBIC investments in critical mineral extraction and processing and designated critical technologies as a priority for SBIC investment. The agency also eliminated restrictive eligibility requirements for SBIC fund applicants and improved efficiency for experienced SBIC fund managers.

Political Stakes

The SBIC program has backed Apple, Costco, FedEx, and Intel since its founding, demonstrating its track record of identifying successful companies. Since the program's inception, SBICs have deployed more than 100 billion dollars through over 200,000 investments in American small businesses and supported the creation of more than 10.6 million new jobs since 1995.

In fiscal year 2024, SBICs deployed over seven billion dollars to more than 1,100 companies, supporting over 113,000 jobs. More than 1,600 SBIR-funded small businesses reported nearly 29 billion dollars in commercialization activity. The SBIR and STTR programs directed roughly four billion dollars in early-stage technology funding to 4,000 businesses in the last year.

Yet the SBA has not provided an annual report on SBIR and STTR programs since fiscal year 2022, raising questions about program transparency and accountability. The Office of Investment and Innovation has been working to implement recommendations from the SBIR/STTR Reauthorization Act and address concerns raised by the Government Accountability Office regarding program fraud and abuse.

Yes, but

Critics argue that cuts to federal science funding directly undermine the SBIR/STTR programs, disrupting the research-to-commercialization pipeline small businesses rely on to deliver innovation, create high-skilled jobs, and support national priorities. The Trump administration's war on equity-focused programs will almost certainly result in the weakening of programs focused on providing small businesses with hands-on support.

Some observers characterized recent disruptions as aggressive. According to the Center for American Progress, DOGE has taken "a chainsaw to the services that small businesses need."

The Bottom Line

The National Science Foundation announced deployment of 250 million dollars to restart SBIR/STTR programs following reauthorization, including a new 40 million dollar pilot focused on next-generation scientific instrumentation. The SBA's pipeline of new SBIC licenses is projected to drive approximately 27 billion dollars in new private sector investment.

Approximately 360 active SBIC funds manage more than 55 billion dollars in total capital. The committee's questioning of SBA leadership may help establish a congressional record regarding recent disruptions and clarify whether lawmakers intend to restore, modify, or further reduce the Office of Investment and Innovation's responsibilities.

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