Community Economic Development Fund


All about counting, controlling and making money for your small business.

Without cash, your business is as good as closed

By Frederick Welk
CEDF Director of Education

Businesses this March quickly went from normal to cautious to a standstill. No wonder small business owners were in a state of shock. Who would ever have predicted these events?

To add to confusion over when, how and if a small business could operate, owners worried about their own health and the safety of family members.

Numerous assistance programs unfolded in the course of a few weeks – the SBA Economic Injury Assistance Loan, the Connecticut Recovery Bridge Loan, the SBA EIDL loan advance (grant), the Cares Act covering the Paycheck Protection Program and the COVID-19 Business Response Line of Credit (for women and minority owners).

CEDF’s Business Advisors had uniform advice for our clients – apply for everything for which you are qualified. To add to the stress of more than a few late evening phone calls with anxious, upset clients, it’s perplexing for our Business Advisors when they feel like they helping throw a life ring at a drowning business owner, only to have the ring and sometimes the rope thrown right back ashore.

“I don’t want to take on any more debt,” was a common assertion. It’s a sentiment that under normal conditions would have brought praise for prudence. But these were not normal times and the terms of the assistance programs were amazingly generous. What our Business Advisors saw that some clients could not yet, was that events even a few weeks into the future were entirely unpredictable. Who could say if the pandemic would get catastrophically worse, or how long non-essential businesses would be shut down? And who could say if another chance for help would come?  Under these conditions, only liquidity matters. If you have no revenue and the meter is still running on certain fixed expenses, your business is sinking into the mire by the day and but what will save you is if you will have enough cash to pull out when business resumes. Remember, most small business owners, unfortunately, don’t typically have more than two weeks of cash available.

So it fell to our Business Advisory team to reinforce that a 30 year loan at 3.75% (EIDL), or a zero interest bridge loan, or a 1% PPP loan (if not entirely forgiven) was unlikely to be the demise of their business. But not having the money to pay a landlord when you are 90 days behind, or having utilities shut off, or being unable to order materials from vendors surely could.

Not to criticize those who felt fearful in those early weeks, but there is a very important business lesson that stands out from this experience. As businesses start to reopen this summer and many owners assess their financial condition after having lost so much revenue, we hope those who applied for and received all the help they could will find it was sufficient and reflect on this lesson – liquidity is everything.



COVID-19: What About Customer Deposits?

by Frederick Welk
CEDF Business Advisor

I've been taking calls from business owners worried about conflicts with customers over deposits for services they have ordered but now either don't want or the business is unable to provide. This is assuredly a time of high tension as businesses of all kinds try to protect their cash. Setting aside the philosophical discussion of how a generous refund policy can aid a business' reputation in the long run in normal times, it's important to understand what legal obligations might be in play now.  Of course, every situation and contract is different, but I reached out to David Dobin, principal with Cohen & Wolf, PC for some general guidance for small business owners.

CEDF: I can imagine an argument that deposits are held as security until the services are provided and the customer meets any of its own obligations. On the other hand, some might argue a deposit is earned immediately because it represents compensation for the potential opportunity cost of setting aside resources.

David Dobin: You are correct that every situation and contract is different and - especially under these emergency conditions - businesses should speak with an attorney to answer specific questions. Even under normal circumstances, disputes over whether a business is permitted to keep a customer’s deposit are common.

The first step in resolving a dispute over a deposit is to review the terms of the applicable contract. The contract may provide that the deposit is fully refundable, only refundable under certain conditions, or not refundable; or the contract may say nothing at all.  Even if the contract allows a business to keep a deposit, however, state and federal statutes and other principles of Connecticut law may forbid it. For instance, the Connecticut landlord-tenant statutes set forth specific rules on when, how much and under what circumstances a security deposit may be kept.  Also, while Connecticut law permits valid “liquidated damages” clauses, it prohibits imposition of a penalty for breach of contract as a violation of public policy. In fact, improperly keeping a deposit paid by a consumer may subject a business to liability under the Connecticut Unfair Trade Practices Act (CUTPA), and CUTPA requires every consumer to sign a statement in bold immediately following a liquidated damages provision which reads, “I ACKNOWLEDGE THAT THIS CONTRACT CONTAINS A LIQUIDATED DAMAGES PROVISION.” See Conn. Gen. Stat. § 42-150u.

A contract permitting a business to keep a deposit will violate public policy if the amount of the deposit is greatly disproportionate to the amount of the damage which would be sustained in the event of a breach of the contract.  Therefore, in determining whether a refund request must be honored, each business should consult with an attorney to consider its unique circumstances, including whether the customer is a consumer, when and why the refund is demanded, the expenses the business has already incurred, and the ability of the business to mitigate its damages by, for example, finding another customer.  

CEDF: What does the Uniform Commercial Code or Connecticut law have to say about when a deposit is earned by the company in a business agreement?  Is the situation only controlled by the language of the agreement or are there overriding obligations?  Seems like a good time to remember that important and owner-composed agreements would benefit from legal review.

DD: Article 2 of the Uniform Commercial Code (codified at Title 42a of the Connecticut General Statutes) governs contracts relating to the sale of goods. Oftentimes contracts will involve both the sale of goods and services, or the sale of goods to consumers, and other principles of law may apply.  As a result, the contract and all of the surrounding circumstances should be reviewed with an attorney to determine the rights to deposited funds. 

Under section 2-717 of Connecticut’s UCC, a contract allowing the business to retain a deposit must be “reasonable in the light of the anticipated or actual harm caused by the breach, the difficulties of proof of loss, and the inconvenience or nonfeasibility of otherwise obtaining an adequate remedy.”  In addition, section 2-615 excuses a seller from timely delivery if it has been made impracticable by an unforeseen occurrence or by a requirement to comply with applicable law.  These statutory provisions are consistent with other legal doctrines – described in response to the previous question – prohibiting contractual penalties and excusing parties from fully performing in the event of unforeseeable events. 

As a result of the COVID-19 pandemic, the Governor of Connecticut has issued a number of emergency orders including rules that close businesses, prohibit people from congregating and suspend court and other legal deadlines.  These orders may make it impossible or impracticable for both businesses and customers to fulfill their obligations under a contract – giving both sides an argument that they are entitled to the deposit.  Businesses are therefore encouraged to try to amicably resolve disputes caused by a government-ordered shutdown by coming up with creative alternate solutions so that the parties can both get the benefit of the original contract.  In doing so, businesses should reach out to their attorneys to better understand their contracts and potential liability when dealing with deposit disputes and, for the future, review their contracts to ensure they include language favorably allocating the risks of such unforeseeable events.

CEDF: What about businesses like caterers that customarily use deposit money to buy the food in advance that must be prepared for an event?  Does this intention have to be spelled out in the contract?

DD: It is always recommended that the contract clearly describe the circumstances in which the deposit is refundable, make clear that the parties intend that the deposit reasonably approximates the business’s damages in the event of a breach, and what the deposit is going to be used for (such as food expenses). The agreement should also include the date after which it is too late to demand a full refund because of expenses that the business is expected to incur. For instance, if a refund is demanded at such a late time that a caterer has already incurred expenses to buy food and other items in advance, and those can’t be used for other events, then the law against “penalties” may not require a total refund of the deposit. 

The current emergency circumstances, however, require other legal principles to be considered. Many contracts have “force majeure” clauses. These contractual provisions prohibit contracting parties from requiring each other to perform in the event of unforeseen and unexpected situations like hurricanes, tornados and natural disasters. In those situations, neither party has a right to insist on performance and the contract may be refundable no matter what the other provisions of the contract say. Even without a “force majeure” provision, other legal doctrines forgive a breach of contract if it is objectively impossible to do so or the purpose of the contract is frustrated.  Although these doctrines are more difficult to prove, they may affect the ultimate question of whether a deposit can be kept or should be returned.  For this reason, a business faced with these difficult questions should speak with an attorney.

CEDF: So, as difficult as this might be for small businesses, isn't the best practice to consider deposits as a liability because it might have to be returned, rather than co-mingle it with normal business working capital and spend it before the services are delivered?

DD: In light of the law against unenforceable penalties in contracts and legal principles that excuse performance when doing so would be impossible or impracticable, businesses should be mindful that not all deposits are non-refundable (even when the contracts appear to make them so). Their finances, including how and when deposited funds are spent, should therefore be adjusted accordingly. For specific questions on how to account for deposited funds, businesses should contact their accountants.

David Dobin is a principal of Cohen and Wolf, P.C. and represents individuals, businesses and condominium associations in a variety of litigation matters, including debt collection actions, trademark disputes, foreclosure defense and prosecution, contract disputes, business tort claims, breach of fiduciary duty claims, mechanic’s lien foreclosures, eviction actions, premises liability matters and other various complex commercial litigation matters.  

The information provided above does not, and is not intended to, constitute legal advice. Readers of this article should contact their attorney to obtain advice with respect to any particular legal matter.

COVID-19: Negotiate a Rent Abatement or Deferral in your Lease

By Jeff Grandfield

I am speaking hourly with business owners that have dwindling revenues or no revenue in the face of the COVID-19 pandemic. Business owners are looking everywhere on how to maintain sales as much as possible and/or reduce overhead expenses. With monthly rental payments typically being one of the largest expenses for business owners, this is a good place to start.

While no landlord wants to see their revenues (rent payments) go down there is hope for rent assistance now! Here are just a few tips to consider:

Be Proactive -- Do not sit back until you have lost money for weeks or months, reach out to your landlord now. In addition to delaying the benefit you may receive you can be sure that your landlord is receiving multiple requests for rental assistance and if you do not get to the table you may risk the landlord assuming you are not in need of this assistance and have more difficulties getting help.

Be Prepared -- In order to obtain rental assistance, your landlord may request information including the status of your business (are you opened or closed), current and past sales numbers to show the impact on your business, whether you have any insurances to cover business losses and other steps you are taking to maintain sales or reduce costs. Having this information ready may expedite any assistance you receive.

Be Flexible -- It's important to differentiate between a rent abatement (forgiveness of all or part of your future rents) and rent deferral (unpaid rent is payable at a future date). While getting all your rent abated for a period of time is certainly the best circumstance, having a partial abatement or deferral may be the difference between closing and continuing operations long term.

At the end of the day, if a landlord has to choose between seeing your business close down or giving you rental assistance, many landlords will elect to work with tenant to hope to secure long term rent payments.

Jeff Grandfield of The Lease Coach is a commercial lease consultant who works exclusively for tenants. Jeff is a professional speaker and co-author with Dale Willerton of Negotiating Commercial Leases & Renewals for Dummies (Wiley, 2013). Jeff can be reached at

Kickstarter may be your best option to raise capital

By Anthony Price
Founder, Loot Scout

In business, anything is possible, but you need money. I wrote the book “Get the Loot and Run: Find Money for Your Business” to help businesses source funds. After personally seeing success by using crowdfunding to finance this book, I decided to use Kickstarter for my next project.

Many people don’t have time to read 300-page books. Yet, books contain ideas and knowledge that provide accessible and affordable solutions for entrepreneurs. This week, I launched my next Kickstarter campaign to raise money to create mini books: 30 minutes of reading that fits in your pocket for on-the go people.

I choose Kickstarter, the largest reward-based crowdfunding platform, because banks don’t fund these types of projects. Moreover, I didn’t want to spend months courting angel investors. I wanted “patient” (slow) capital on my terms.

Since April 2009, almost $4.8 billion has been pledged on Kickstarter and over 177,000 projects have reached their goals, everything from a smart ring, a documentary about public transportation in New York City, to handmade donuts.

Kickstarter is all or nothing. If you don’t reach your goal within the allotted time—even if you’re only a dollar short—you get nothing, and your backers’ credit cards don’t get charged. The pressure is real, like watching your favorite sports team attempt a comeback while the clock winds down.

A good story and marketing is the key. While Kickstarter has 17.4 million backers, you must persuade your tribe to be the earlier contributors. Successful campaigns get family, friends, friends of friends and the public excited about the projects.

You must spread your message through social media, blogs, vlogs, email, texts and personal telephone calls. I sent a mass email to my newsletter list a few days before launch to show my prelaunch page. On launch day, I sent an email reminder to announce that my campaign was live.

I have only 35 days to reach my goal of $20,000. Visit my campaign to see how I describe the project. In the end, you may learn that Kickstarter is your best option to raise capital on your terms.

Author Anthony Price is founder and CEO of LootScout. He has appeared on CEDF’s Small Business as Usual Podcast. An excerpt of his book Get the Loot and Run: Find Money for Your Business” was published on this site last year. Reach him at





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