As credit lines have shrunk and consumers have cut back on spending, thousands of small businesses have closed their doors over the last year. The plight of struggling firms has been aggravated by the reluctance of banks to lend money, said Brian Headd, an economist at the Small Business Administration's office of advocacy.
"While bankruptcies are up, overall, small-business closures are up even more," Headd said.
California has been particularly hard hit. The latest data show small-business bankruptcies up 81% in the state for the 12 months ended Sept. 30, compared with the previous year.
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