Business Owner Reflection During COVID-19
Category: COVID19 | Growing Business
May 9, 2020

Running a small business is challenging even in the best of times.  When a once-in-a-lifetime ‘black swan’ event like COVID-19 upends the economy these challenges can seem overwhelming.

The U.S. government has authorized an unprecedented $2.7 trillion to provide relief for health and economic damage caused by COVID-19, including approximately $800 billion earmarked for small and mid-sized business.  That many of these funds are already exhausted is evidence of the acute pain felt by the nation’s many entrepreneurs and small business owners.

As a business owner and attorney with a practice focused on small businesses, I have witnessed the damage the combination of disappearing demand and an uncertain future has caused. This includes not just an extreme loss of revenue, but also a screeching halt to fundraising and M&A transactions.

However, it is critical not to lose hope. There are still resources out there to help you fight through the economic turmoil COVID-19 has caused.  Also, now is a good time to carefully review existing contracts, and augment new contracts, to provide for the mitigation of business risks related to external forces like COVID-19.

Financial Resources Available to Business Owners

Although the first round of small business disaster relief funds was exhausted, the U.S. Congress has authorized additional funds for loans to help business owners during this hardship.

  • Paycheck Protection Program – The Paycheck Protection Program is a loan designed to provide an incentive for small businesses to keep their workers on payroll.

The Small Business Association will forgive loans if it keeps its employees on its payroll for eight weeks and the money is used for payroll, rent, mortgage interest, or utilities.

  • Economic Injury Disaster Loan Emergency Advance – This program is for any small business with less than 500 employees (including sole proprietorships, independent contractors and self-employed persons), private non-profit organizations or 501(c)(19) veterans organizations affected by COVID-19. While these EIDL loans are not forgivable like the PPP loans, they offer attractive interest rates and amortization over long terms.

Also, there may be local funds available to you. You can check out resources on your local chamber or State Department of Labor websites.

Upholding Contracts During COVID-19

Another issue arising in times of COVID-19 is contractual obligations. You’ve probably read many stories from family members and friends about canceled weddings, Bar Mitzvahs, fundraisers and other major gatherings.

In what cases were the individuals able to get their deposits back and how much did the business owners lose? There are several contractual clauses that could address the “pandemic” scenario.

Force Majeure Clause

Many contracts include the “Act of God” or “force majeure” clause that allows one or both parties not to perform its obligations under the contract if certain events occur.

It may specifically include pandemics, or it may include more general language that would encompass a pandemic, such as natural disasters, “acts of God,” or government intervention.

Other factors to consider include whether it is impossible to perform under the contract because of a government order and whether the pandemic was foreseeable at the time the contract was made.

For example, AirBnb provided no cancellation fees to any AirBnbs booked prior to March 14th. However, those made knowingly after government closures had to pay a cancellation fee.

Contingency and Extension of Time Clauses

Look for contract provisions that may give the parties extensions of time due to a superseding event.

Even if there is not a specific extension of time clause, consider whether a reasonable extension of time would make it possible for the parties to perform. For example, sticking with the same wedding venue but booking for another date.


If the pandemic does not excuse performance, it is important to understand how the contract’s termination provisions work so that you can determine if you, or the other party, have a right to terminate.

A material breach typically allows the other party to terminate a contract and, in some contracts, a party can terminate even without a breach. Often there are notice requirements (e.g., 60 days) and requirements to give the breaching party an opportunity to cure the breach before a contract can be terminated.

Business Relationships Are More Than Contracts

While it can be helpful to dust off existing contracts to find helpful provisions, ultimately business relationships are so much more than what can be captured on a piece of paper.  Remember, the other party is also dealing with the same unanticipated shock.  A simple conversation regarding how each of you can modify the relationship so that you will both survive through the crisis can be worth more than the most favorable contractual terms.

There Will Be Opportunities

As with any period of disruption, there will be new opportunities that arise as existing frameworks and relationships are reevaluated and restructured.   Small businesses are generally more flexible than large institutions, and therefore in a better position to take advantage of the inevitable changes borne from this crisis.  As you ‘circle the wagon’ to survive, it is also important to plan for the future and the new opportunities ahead. 

Do you have a specific question about how the coronavirus will change any legal or contractual obligations for you and your business? Reach out to Bridgeford today!

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