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Fiscal Cliff Threatens Small Businesses

Fiscal Cliff Threatens Small Businesses
Drew Guarini
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SAN BERNARDINO, CA - JULY 12: San Bernardino City Hall is reflected in the windows of one of the vacant buildings across the street on July 12, 2012 in San Bernardino, California. The San Bernardino City Council voted this week to file for Chapter 9 bankruptcy protection, making San Bernardino the second largest municipality in the nation ever to file for bankruptcy and the third in California to opt for bankruptcy in the past two weeks. Stockton, California with a population of nearly 300,000, became the biggest when it filed for bankruptcy on July 3, and the Sierra Nevada Mountains ski town of Mammoth Lakes, California filed onte same day. The city is facing a $45.8 million budget shortfall and is in danger of not making payroll for the next three months. City officials are set to discuss the next steps in the bankruptcy process and may also declare a fiscal emergency at its meeting next Monday. (Photo by David McNew/Getty Images)
SAN BERNARDINO, CA - JULY 12: San Bernardino City Hall is reflected in the windows of one of the vacant buildings across the street on July 12, 2012 in San Bernardino, California. The San Bernardino City Council voted this week to file for Chapter 9 bankruptcy protection, making San Bernardino the second largest municipality in the nation ever to file for bankruptcy and the third in California to opt for bankruptcy in the past two weeks. Stockton, California with a population of nearly 300,000, became the biggest when it filed for bankruptcy on July 3, and the Sierra Nevada Mountains ski town of Mammoth Lakes, California filed onte same day. The city is facing a $45.8 million budget shortfall and is in danger of not making payroll for the next three months. City officials are set to discuss the next steps in the bankruptcy process and may also declare a fiscal emergency at its meeting next Monday. (Photo by David McNew/Getty Images)

NEW YORK (CNNMoney) -- Potential massive cuts in federal spending are still months away, but some small businesses that rely on government contracts are already feeling the pinch.

The looming cutbacks -- part of the "fiscal cliff" -- are causing firms to slow business or shrink production and could threaten jobs, according to company owners.

The $110 billion in cuts for 2013 will kick in on Jan. 2 unless Congress agrees on an alternative. They will hit defense spending particularly hard but also affect other popular non-defense programs funded by Washington.

Last year, small firms received $91 billion in federal contracts, slightly more than a fifth of all the money awarded by the federal government to private enterprise in 2011.

Read more on CNN Money

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