Faced with rising fuel and supply costs and increasing numbers of customers who put off paying their invoices, small businesses are becoming increasingly crunched for cash.

It's the same situation affecting millions of U.S. households and large corporations.

But unlike a company with deep pockets, lack of income for a small business has an immediate and sometimes painful effect. For some, it can mean layoffs of dedicated employees. For others, it's the elimination of resources. In the worst cases, it means closing.

"It was like we were going backwards," said Sandra Horton, who closed her Cary consignment shop, Genevieve's Closet, about two months ago. "I was working, not paying myself anything, using my cell phone as the telephone."

Making such decisions isn't easy, especially for entrepreneurs who have invested so much of their time and themselves in their businesses.

If enough businesses shut down, the economy as a whole could suffer as jobs disappear, along with the pay that those consumers would spend.

"I really hate we couldn't make it," Horton said, "but it just happens that way sometimes."

Economists note that the number of failing businesses is bound to increase in times of economic strain. Those that survive often emerge leaner and stronger when the economy picks up.

But that doesn't mean making it until then is any easier.

Keeping Peking Garden

For Cody Tseng, closing a restaurant was a matter of timing. Rising food costs and uncertainty about the future pushed Tseng to sell Cody's Chinese Bistro and Pub at Glenwood South in Raleigh, which bore his name for five years.

He declined to say how much he was paid, but he said he lost money on the venture.

His other Raleigh restaurant, Peking Garden, remains open.

"I'm 53," he said. "I could not start over again. Most restaurants, if you can get 70 percent back [of your initial investment], you're OK. I made it."

In the five years that Cody's was open, the price of a 100-pound bag of rice doubled to $40. Five-gallon bottles of vegetable oil jumped to $28 from $15.

The new owners "gave me a very good deal," he said. "Glenwood South is still the best ... [location], everybody wants to go in. ... At this time, I'd like to have cash in my hand."

Cody's closed at the end of April and will soon become a Thai restaurant.

The crux: Cash needed

Small-business owners are often undercapitalized, and that can lead to the rapid deterioration of a business's finances when times get tough, said Bruce Clarke, president and CEO of Capital Associated Industries. The Raleigh company dispenses human resources advice to its clients.

"They don't have unlimited credit lines, and often they're owner-operated types of things," he said.

Since December, Clarke said, 40 of his 1,000 clients have contacted Capital Associated asking for advice. In an informal survey that his company conducted last week, 16 percent of companies said their number of employees will decrease this year.

"Four are closing a facility or a branch," Clarke said. "A number are talking about conserving cash. ... You've heard the old saying that hope is not a plan, but a lot of people do use hope as a plan."

Don't just sit there

Companies that are experiencing hardships should act quickly and decisively, he said. "Businesses that haven't been through these cycles in the past wait too long to make a decision," he said.

"This is a good time to reorganize some things, adjust some cost structure and retrench."

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