Recent federal policy shifts create uncertainty for businesses that rely on government funding, such as grants, contracts, or loan programs. Some agencies have temporarily suspended solicitations, while others operate as usual. These suspensions are leaving many organizations wondering how to proceed. 

Naturally, this can feel like a time of instability, but the reality is a little more nuanced. The government is reassessing its spending priorities, but this doesn’t mean funding is disappearing altogether.

Certain funding programs, particularly those within the Department of Defense (DoD) remain largely unaffected, while other agencies have taken a more cautious approach. Meanwhile, workforce reductions, return-to-office (RTO) mandates, and structural changes in programs like the 8(a) initiative indicate a broader effort to streamline governmental operations. 

The best thing your business can do at this point is to stay informed, flexible, and strategically diversified to weather these shifts. 

It’s a time to be vigilant but not to panic.

Government Agencies Are Responding Differently to New Directives

The federal government’s recent directives have caused varied responses across agencies, in some cases creating confusion about what is moving forward and what is on hold. Some agencies, such as the National Science Foundation (NSF), have taken a cautious approach, pausing new solicitations and awards while waiting on further clarification. Others, including the DoD, have interpreted the guidance differently, and it’s business as usual. This inconsistency has left some businesses unsure about whether funding opportunities will remain available in the near term.

One of our biggest takeaways is that not all government funding is equally affected. Programs like the Small Business Innovation Research (SBIR) initiative continue as planned for 2025, largely because congressional mandates back these programs that require legislative action to alter. 

Similarly, existing contracts already signed and obligated for payment are still secure, as government accounting rules make it difficult to reverse obligated funding without a formal termination order. 

Understanding the Difference: Contracts vs Grants vs Loans

Since it’s so difficult to reverse obligated funding without these formal termination orders, businesses working under existing contracts should continue operations as planned unless an agency explicitly tells you to do otherwise.

Grants and loans, however, fall under different regulatory structures and have seen more disruption. Executive orders have led some agencies to pause new grant and loan programs as part of a broader spending assessment. Unlike contracts, which operate under very strict federal acquisition regulations, grants function as agreements rather than enforceable contracts, making them more susceptible to shifting budgetary priorities. 

This situation has made businesses that rely on grants more uncertain, particularly those applying for new funding. If your company depends on these sources, diversifying your revenue streams and staying informed on agency-specific updates will be key to navigating the uncertainty.

Small Business Challenges & Structural Shifts In Government Spending

Many of the founders we speak with, especially those transitioning from research and development (R&D) to commercialization, are unsure whether their planned funding pathways will still be available. While some agencies have signaled a business-as-usual approach, others have slowed down or paused new awards, making it tough to plan for the future. 

‘Set-aside’ programs for small businesses including Women-Owned Small Businesses (WOSB), Service-Disabled Veteran-Owned Small Businesses (SDVOSB), and other associated socio-economic categories are under some recent scrutiny. With the recent federal actions eliminating certain DEI-focused initiatives, some of these businesses are concerned set-aside programs could be at risk. However, these programs are mandated by legislation, meaning they operate under an entirely different authority than hiring initiatives.

The Small Business Administration (SBA) continues to set annual contracting goals for these groups, ensuring qualifying businesses receive funding. 

One area under prolonged scrutiny is the 8(a) program, which provides some contracting advantages to certain businesses. The program has faced increased evaluation over the past few years, with discussions about whether it has created some unintended monopolies in certain industries. 

Federal agencies temporarily stopped accepting new 8(a) applications last year, and while the program has re-opened, it remains a hotly debated topic. For companies currently in or seeking entry into the 8(a) program, staying informed about potential structural changes that could impact future opportunities will be essential.

Again, we reiterate that flexibility is key. 

You should continue pursuing grants as normal, but remain flexible in your approach. Work on your commercialization efforts and stay informed with your federal contracting officers as federal agencies continue to reassess their funding priorities and pivot accordingly. 

A Few Pieces of Advice for Companies Engaged in Government Funding

If you already have a signed contract, keep moving forward.

Acting prematurely based on the speculation you read or hear could cause unnecessary disruptions to your business and result in lost revenue.

Here are four key takeaways that we’ve covered:

  1. Keep executing on signed contracts.
  2. Don’t rely solely on government funding.
  3. Expect longer timelines for new opportunities.
  4. Stay informed and engaged.

Even in normal conditions, the government moves slowly. As we like to say, the government is a great customer, but it can also be a slow customer. As agencies are reassessing spending, this pace could slow even further, so it’s reasonable to assume some grants and solicitations will take longer to process.

The best way to avoid surprises is to stay in touch with your contracting officers, always monitor formal agency updates, and be proactive about any changes that could affect the stability of your funding. 

In simplest terms, stay flexible and agile!

In Conclusion

Government funding is undoubtedly shifting, but it isn’t disappearing. While some agencies are pausing grants and contracts, others are proceeding normally, and obligated financing is secure. Our biggest piece of advice is for your business to stay informed, flexible, and proactive. These consistent practices will help you continue to navigate these changes without disruption. The key takeaway is that while uncertainty exists, it’s not a cause for panic; it’s a reminder to stay adaptable.

The best strategy is a balanced one. To balance and mitigate overall risk, you should always fulfill your government contracts and focus on strengthening your commercial revenue streams. Delays in new funding opportunities come with the territory, but if you stay focused on long-term resilience rather than giving in to panic, you can continue leveraging government funding while staying prepared for whatever comes next.

Need some help navigating the space and the changes that are taking place?

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