There is no denying the fact that the growth of our country largely depends on Small and Medium Enterprises (MSMEs), which contribute significantly to the GDP, creating massive employment in every corner of India. Due to its importance, adequate support is expected from the government to ensure that the growth of small and medium enterprises does not stop at any time, especially amid a pandemic that has brought major global economies to a standstill.
Some challenges of small and medium enterprises from all sectors were hard hit by the restriction, as industries remained closed for more than two months from the end of March to June. The current economic situation is not favourable for small-scale industries because liquidity in the system is limited, even as the government pumps out stimulus measures to keep the industry alive. Although the government has introduced several economic measures in terms of funding, there are still gaps that prevent the sector from performing well. We guide you through the biggest industry mutilation challenges.
Challenges small and medium enterprises are facing nowadays
The ease of doing things is still a bottleneck
Most challenges of small and medium enterprises face problems in the early stages due to too many regulations and permits. Even as India rises in the World Bank’s Ease of Doing Business Index, there are several loopholes in the system that marginalize businesses and prevent them from expanding and prospering. Entrepreneurs are often deterred from starting a business due to issues related to MSME loans, contract enforcement, and building permit processing. He took 1,
Five days to fulfil the contract, longer than 15 years ago. There has been a significant change in the registration of new companies, which has been reduced from 127 days to 30 days. A local entrepreneur still has to wait for 12 formalities to set up a business in Mumbai, while on the global average, he has only five formalities.
Financial expertise lacks
Although entrepreneurs are constantly coming up with new strategies and planning to expand their existing businesses, there are still a large number of challenges for small and medium enterprises with the financial knowledge to steer the business in the right direction. Without sound financial knowledge, entrepreneurs may not be able to make important business decisions related to MSME loans. Without financial knowledge, you may be forced to make bad decisions that could cost the business unless you seek outside advice.
Knowledge of finance is also important as you have to rely on an MSME loan to survive the crises that can knock on your door anytime. That is why it is important to understand everything related to MSME loans, get familiar with the MSME loan interest rate and compare it before taking a loan in the market. This will act as a saviour for the challenges of small and medium enterprises.
Lack of financing solutions
Without sound financial knowledge, entrepreneurs may not be able to make important business decisions related to MSME loans. Without financial knowledge, you may be forced to make bad decisions that could cost the business unless you seek outside advice.
Knowledge of finance is also important as you have to rely on an MSME loan to survive the crises that can knock on your door anytime. That is why it is important to understand everything related to MSME loans, get familiar with the MSME loan interest rate and compare it before taking a loan in the market.
Technological backwardness
Most companies fail to take advantage of the latest technological developments in their industry due to a lack of knowledge and awareness. Therefore, another added to the list of challenges for small and medium enterprises is that they must be informed about the technological developments that are important for the growth of their business. Scientific research institutes need to be aware of the local MSME clusters and take note of their technology-related issues and problems.
However, concerted efforts have been made to provide solutions to these problems for small and medium enterprises, as the government wants to launch the Bharat Craft e-commerce portal, which would act as a direct interface between sellers and buyers.
Workforce crises
The majority of challenges of small and medium enterprises are of manpower, and especially in new normal times, ongoing migration crises have become one of the most difficult areas for the industry to operate in such pandemic times. In addition to manpower issues, companies should also invest in capacity development, training, and market linkages to facilitate both urban and rural micro-entrepreneurs. Emphasizing skills development can benefit the industry significantly in times of crisis.
Trustworthiness
It is seen that banks are reluctant to give loans to SMEs because the loan amount is still small, and, according to the banks, small and medium enterprises do not have the required repayment capacity. In this situation, they impose stricter rules on these startups. Some companies also cannot check their credit rating, making it difficult to get a loan. In addition, traditional credit facilities make it difficult for business owners to meet strict eligibility criteria, and the lengthy MSME loan approval process further reduces their morale.
Lack of collateral
Some companies may find it difficult to get an MSME loan due to the strict collateral protocol. Since small businesses may not have assets that qualify for a loan, business owners can opt for unsecured business loans from lenders without worrying about providing collateral or assets to get an MSME loan approved.
Conclusion
Small and medium enterprises form a significant part of Indian businesses. According to reliable sources, nine out of ten companies in India are small businesses. Small and medium enterprises play a key role in the development of business and industry. Small units are also responsible for generating employment across India.
The SME sector is going through a paradigm shift thanks to government initiatives like Make in India and several corporate loans to encourage youth entrepreneurship. Many problems faced by small businesses in India hinder the development of the SME sector.
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