Three major challenges faced by SMEs in 2022.



Three significant challenges faced by Indian SMEs in 2022

SMEs account for a sizable chunk of Indian enterprises. According to reliable sources, nine out of ten enterprises in India are small businesses. SMEs play a crucial role in the development of trade and industry. The small business units are also responsible for employment generation across India.

The SME sector is witnessing a paradigm change because of government initiatives like Make in India and several business loan schemes to encourage entrepreneurship among youth. A broad spectrum of problems faced by small businesses in India acts as a roadblock to the progress of the SME sector. 

SMEs- the growth drivers of the Indian Economy

The small business sector benefits from new technology, Foreign Direct Investments, government schemes, and the overall positive outlook of the economy. Besides being vital growth drivers of the country, these entrepreneurs have to grapple with the challenges faced by small and medium enterprises in India.

The question, ‘how many business challenges are faced by the companies today can elicit several responses. The answers depend upon the size of the business and the economic environment. There has been a considerable rise in the challenges of small business entities after the recent pandemic.

 Fortunately, India is steadily recovering from the economic slowdown after the pandemic. However, several problems plague small businesses, like a shortage of funds and human resources. Let us limit our discussion to the three most pressing challenges SMEs face in India.

Embracing new technology 

The need to adopt innovative technology was never so crucial. Small businesses must become future-proof by embracing digital technologies. These technologies help an enterprise become competitive as more players enter the arena.

 It is encouraging to witness the adoption of digital technologies by small traders who use billing software or farmers using apps to receive crucial weather and farming updates. Several local businesses leverage bar-code technology for invoicing and maintenance of inventories.

According to some reliable estimates, the rate of successful digitalisation is a meagre 20 per cent in the Indian SME sector. Small businesses may not adopt the digital transformation because of the considerable costs of buying software and other infrastructure. One more problem in digital adoption is the shortage of skilled workforce. Trustworthy online lending platforms help overcome challenges SMEs face in India by offering small business loans at a click of a button. 

Small businesses that invest heavily in digital adoption cannot explore the real advantages because of a lack of expertise. It can severely drain the finances, causing operational hiccups. Many SMEs do not know how and where to start the digitalisation process.

Failing to delegate responsibilities to digital adoption by training people is another problem. Many entrepreneurs control the implementation of digital solutions and cannot truly reap the benefits of digital advancements.

Access to timely credit facilities

Difficulty accessing quick and low-interest credit is among the three significant challenges of small business enterprises in India. Lack of instant credit availability restricts the growth of small businesses, as they cannot purchase raw materials or upgrade infrastructure. Banks perceive small business loans as high risk.

Stringent loan conditions and collateral rules reduce the possibility of qualifying for a small business loan. Small entrepreneurs with no access to gold or property to offer as collateral suffer because of a lack of funds for business growth.  

Inability to avail of flexible loan facilities can hamper the growth plans of small businesses. It also impacts the purchase of new shop furniture or hiring the new staff. 

Funds shortage is also responsible for the inability to buy quality raw materials. There was considerable erosion of financial resources during the lockdown period. It is causing a severe cash flow crunch and hampering the growth of small businesses.

 Despite the availability of several government schemes for MSME loans or collateral-free loans, regulatory hurdles and process delays reduce the prospect of securing such advances.

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Labour shortages 

Shortage of expert labour is among the main challenges faced by small and medium enterprises in India. The problem is more acute in rural and semi-urban towns. It is because of a tendency among skilled workers to move to larger cities for better employment opportunities. SMEs in most cities have to rely on unskilled workers to execute business processes like production, sales, and accounting.

Despite India’s vast human resource pool, the labour shortage is prevalent across many businesses and industry sectors. The main issue involves the scarcity of skilled personnel. It impacts the overall product quality and causes service delays by hampering the production process. Technology adoption takes a backseat because of skilled labour shortages.

Way forward

Small business challenges restrict SMEs from scaling to their maximum potential. Resolving these issues can help SMEs achieve self-sustainability and growth.

Addressing these three significant problems small businesses face in India is a crucial development in the SME sector. Easy availability of credit facilities is vital to solving most small business challenges.

Entrepreneurs can go for the adoption of new technology by availing small business loans. Easy collateral-free loan facilities can help them adopt ERP systems or software to streamline accounting and production. Substantial financial support with no procedural hurdles can boost the growth of SMEs in India.

According to estimates, skilled employees can boost the efficiency of a business. Lack of capital can stunt the business growth as the small business owner cannot hire new employees. MSME loan from NBFCs is a suitable solution to resolve the skilled labour shortage.

The MSME ministry offers a Skill Mapping facility to access skilled employees at the district level. There are several low-interest loan products to consider. You can use their online portal to check your business loan ability at the click of the button.