Small businesses hit hard by credit squeeze

Small businesses used to create 60 to 80 percent of all new jobs. But now, thanks to the credit squeeze by banks who have been bailed out by the government, many small businesses are having to close or cut back. About 50 percent of the lending sources for small businesses are credit cards. Owners, who must buy goods to have inventory to sell to customers, often use credit.

Even small businesses that have a credit line at the bank for inventory purchases are seeing their credit lines slashed. As I indicated last week, these credit card cuts will stall the recovery, and based on a study by Meredith Whitney, we're only at the beginning of these cuts. She predicts that $2.7 trillion of credit card lines will be cut by the end of 2010.