Following are the main problems faced by small businesses:
1. Finance: Non-availability of adequate funds in order to cany but business operations is one of the major problems. Due to lack of credit worthiness, many of these units fail to raise funds from the capital market. Banks also hesitate to lend money to these units because many of these units fail to provide adequate collateral security or guarantees.
2. Raw materials : Obtaining good quality raw material is smother important problem faced by these industries. They have to either compromise on the quality or have to pay a high price to get good quality materials. Bargaining power is relatively low because of the small quantity of purchases made by them.
3. Managerial skills : A small business is established and managed by a single individual. Hence, he/she may not possess all the managerial skills needed to run the business. Due to shortage of funds, they cannot afford to employ professional managers.
4. Labour: Due to shortage of funds, these enterprises are not in a position to afford high salaries to the employees. As a result, the productivity per employee is low and the rate of labour turnover is high. Therefore, attracting talented and skilled employees is a major problem faced by these units.l
5. Marketing: In many small scale units, marketing is a weak area. Direct marketing is not feasible for these units since they lack the necessary infrastructure. Hence, they have to depend on middlemen who sometimes exploit them by paying low prices and delaying the payments.
6. Sickness : Many of these units are becoming sick because of various internal and external problems. Lack of talented and skilled labour and managerial and marketing skills are the various internal problems while delayed payments, inadequate loans, lack of demand for their products, etc. are various external problems faced by these units.