What Should a Small Business Refund Policy Say?

By Bill Stilwell · Last reviewed October 17, 2026

The short answer

A refund policy says who can get money back, for what reasons, how much, how fast, and what isn’t covered. Write it in plain words, show it before the customer pays, and follow it every time. If you promise a refund in an ad or a guarantee, you have to give it.

What this means

A refund policy answers these questions:

Who qualifies? For example, “unused products within 30 days” or “if we can’t fix the problem on a second visit.”
What do they get? Full refund, partial refund, store credit, or a redo of the work.
How fast? “Within 10 business days of approval.”
How do they ask? Phone, email, or a form, and what proof they need.
What’s excluded? Custom orders, completed services, used items, or damage caused by misuse.

Made-up example: Ridgeline Bike Shop sells parts and does repairs. Unused parts in the original package can be returned for a full refund within 30 days. Repairs aren’t refunded, but if the same problem comes back within 30 days, the shop fixes it free. Both rules are on the receipt, the website, and a sign by the register.

Why it matters

Promises are binding. The Federal Trade Commission (FTC) says a money-back guarantee in an ad must be honored and its conditions disclosed. A “satisfaction guaranteed” line you don’t honor is a problem.
Customers have card dispute rights. If a customer can’t get a refund from you, federal law gives card users ways to dispute charges with their card issuer. A clear policy, followed every time, helps you respond (see 10.7.7 Chargebacks).
Refund fights turn into reviews. Unclear rules make a small refund request feel like a battle.
Some sales come with a legal refund right. Under the FTC Cooling-Off Rule, if a covered buyer cancels, you have 10 days to refund their money (see 11.1.7 Cancellation Policy).

Who this applies to

Every business that takes payment. Product sellers need return and refund rules. Service businesses need rules for unhappy customers, unfinished work, and deposits.

There is no single federal rule that sets refund terms for every small business, and state rules vary. Your state may have its own rules about refunds or about how a policy must be shown. Check with your state attorney general’s consumer protection office.

How to do it

Decide what you will refund and what you’ll offer instead, like a redo, repair, or credit.
Set time limits. Count from the date of purchase or the date the work was finished.
List exclusions in plain words. Custom work and completed services are common ones.
Set your refund speed and stick to it.
Say how to ask for a refund and what the customer needs to provide.
Match your guarantees. If your ads or website promise anything, your policy must deliver it (see 11.3.3 Guarantees).
Show it before payment: on the website (see 13.4.7 Policy Pages), in the agreement, on receipts, and at checkout.
For online product sales, add your return policy to Google Merchant Center or use return policy structured data, so Google has the same rules you show customers.
Log every refund and the reason. Patterns tell you what to fix.

What proof to keep

The policy text with the date it took effect, and older versions
Screenshots of where it’s shown (website, checkout, receipt)
A log of refund requests, decisions, amounts, and dates
Proof of each refund payment

Common mistakes

“All sales final” in fine print while ads say “satisfaction guaranteed.”
No time limit. Customers ask for refunds months later.
Slow refunds. A refund that takes weeks feels like a refusal and often leads to a card dispute.
Different rules for different staff. One person says yes, another says no.
Online store policy that doesn’t match Merchant Center. Google says settings in Merchant Center or Search Console take priority over the markup on your site, so keep them in sync.

When to get help from a pro

Attorney: to review your policy against your state’s rules. Questions to ask:

Does my state require me to post a refund policy, and where?
Can I offer store credit instead of cash refunds?
How should my policy treat deposits for custom work?

Bookkeeper: to set up how refunds are recorded (see 10.7.8 Refunds).

Bill’s note

[Bill: add a short note. For example, how SiteSmarty handles a client who asks for money back on a website project, or what you’ve seen happen when a business refused a fair refund and the review that followed.]

How I did this for SiteSmarty

[Date I did this:]
[What I actually did, step by step: the refund rules for SiteSmarty services and where I posted them]
[What it cost and how long it took:]
[What surprised me or what I’d do differently:]
[Screenshot or photo to add, with private info blurred: the refund policy on the SiteSmarty website]
[Result so far:]

Questions people ask

Do I have to offer refunds? Often not by federal law, but if you promise one, you must honor it, and state laws vary. Some sales, like covered in-home sales, come with a federal cancellation and refund right.

How fast should I refund? Set a clear time and meet it. The FTC Cooling-Off Rule uses 10 days for covered cancellations, which is a useful benchmark.

Can I give store credit instead of cash? Usually, if your policy says so up front. Check your state’s rules.

Does Google show return policies? For online sellers, yes. Google can show return details with products and in knowledge panels when you share them in Merchant Center or with structured data.

Audit check

Question: Is there a written refund policy, shown before payment, that matches every guarantee and is followed every time?
Pass looks like: Clear eligibility, time limits, exclusions, refund speed, and request method, posted in all customer-facing places. Merchant Center settings match for online sellers.
Fail looks like: No policy, conflicting versions, guarantees the policy doesn’t honor, or slow and uneven refunds.
Evidence to collect: Policy screenshots, the agreement, receipts, the refund log, and Merchant Center return settings if you sell online.

Where this fits

Do this first: 11.1.6 Payment Terms, 11.1.7 Cancellation Policy

Do this next: 11.1.9 Warranty

Sources

Federal Trade Commission, "Advertising FAQ's: A Guide for Small Business" (checked October 17, 2026)
Federal Trade Commission, "Using Credit Cards and Disputing Charges" (checked October 17, 2026)
Federal Trade Commission, "Buyer's Remorse: The FTC's Cooling-Off Rule May Help" (checked October 17, 2026)
Google Search Central, "Merchant Return Policy Structured Data" (checked October 17, 2026)
Google Search Central, "Creating Helpful, Reliable, People-First Content" (checked October 17, 2026)

This page explains general rules and Bill's own experience. It is not legal, tax, or insurance advice. Talk to a qualified professional about your situation.