Major Challenges Faced by MSMEs

India is an economy that has an equal contribution from the organized and unorganized sectors of the country. The growth of our country relies on the micro, small, and medium businesses that have a significant role in the GDP. These businesses are generating employment and giving an opportunity to the youth of the nation.

However, the COVID-19 pandemic has deteriorated the economic conditions of MSMEs. Lack of liquidity in the system has caused a lot of distress in these businesses. Let us see the top challenges that are the face of reality for the MSME sector: 

Ease of Doing Business

Most start-ups in India face a lot of difficulty in getting approval and clearing their legal papers. Several loopholes are preventing young minds from taking the leap of faith and starting their own business. Many entrepreneurs are demotivated to start their businesses due to the difficulty of getting small business loans.

From enforcing contracts to getting financial support, Indian start-ups are not in a very good position when it comes to ease of business. However, government schemes and NBFCs are extending their support to these businesses. The road to success seems a far-fetched dream for most due to these difficulties.

Access to a Financial Solution

Accessing a small business loan or business property loan is not easy when you come from an unorganized sector. Lack of funding affects every aspect of the business, including raw material sourcing, access to new technology, and manufacturing. Usually, small businesses fail to serve the proper papers, collateral, and certifications that can help them in getting a bank loan. The economic slowdown has further impacted the running of small businesses.

Technology

Technology can give an edge over the competition with a long-term benefit. Lack of proper funding restricts access to the latest technology for start-ups. This can be taxing in the long term as it keeps these start-ups from innovating and using technology to streamline their work process. However, many technology giants are collaborating with potential small businesses to bring a change in the Indian business context.

Collateral for a Business Loan

When the central issue is funding, a lack of collateral certainly affects the loan approval process in a negative way. Strict collateral protocols by financial institutions make it difficult for start-ups to avail of business loans.

However, NBFCs are the ray of hope for start-ups in India to get business loans with lenient collateral protocols. They are providing the necessary financial support to these businesses to bring about a revolution in the business sector.

Skilled and Unskilled Labour

Indian start-ups run on a lower number of employees who manage multiple work domains. Most professionals prefer to work in a sophisticated environment in multinational companies or ask for a large sum of compensation for working in a start-up. It is easy to hire a fresher, but they lack experience, which is highly valuable when you start a business. It’s one of the most common challenges faced by start-ups.

Starting a business can be intimidating, but several government schemes and support from NBFCs are bringing change in the current scenario. New India needs start-ups to create employment, opportunity, and innovation in society. This is essential in transitioning from a developing country to a developed nation in the times to come.