08/10/2012 03:14 pm ET

Fiscal Cliff Threatens Small Businesses

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.

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