Challenges faced by SMEs in 2022

Working Capital Loan

2021 has been a challenging year for everyone. However, SMEs have especially taken a hit on their business due to new disruptive factors like the supply chain crisis which has led to an increase in demand for working capital, rising inflation and labour costs, reducing their ability to generate economic growth.

While it can be extremely rewarding to have a small business, it comes with its fair share of obstacles. Also, considering that SMEs in India employ 40% of India’s workforce and that the country has 42.50 million businesses, it is extremely important to pay attention to the challenges faced by these SMEs and how we can help them tackle them. Some obstacles that all business owners face is unavailability or shortage of finance, lack of skills or talented manpower. However, we have to understand the larger picture and the challenges faced by most SMEs in 2022.

So, let’s filter out the top problems SMEs face and how they can tackle them.

1.    Coping with technology advancements:

         According to the research done, a lot of SMEs function from rural and backward areas, which is why at times, there is a lack of awareness or education available to them. Adapting to better technology is recommended as it can make it easier to manage inventory, staff accounts, etc. which also makes a business run longer.

However, it can also become difficult for these SMEs to get access to such advanced software and technology due to a lack of awareness or capital. This is where business loans come into play. According to the specific requirement, businesses can opt for SME loans in India from banks, NBFCs, or other financial institutions.

Nowadays, NBFCs have come ahead to offer loans to small and medium businesses with easier and faster processes.

2.    Growing without deteriorating quality:

         People often forget that it is important to maintain the same quality while growing. All SMEs should make sure that while creating or making products, they follow a better process without reducing its quality. This is important because this quality was the reason you got these clients in the first place and hence compromising on it would not benefit you.

To do this, you can hire the right people who know how to maintain the quality of your product and continue to do so, no matter how big the business gets.

For a business to achieve this kind of growth and expansion in today’s competitive market, it is important to have a strong financial backup. During a crisis, you should avail a loan from your preferred NBFC as they have a faster rate of approval without the hassle of lengthy paperwork.

3.    Payment/cost issues:

         In the current environment, most people prefer online transactions. However, the cost of transactions for both online and offline transactions are very high, which does not help generate high volumes for the service providers. The SMEs have to pay a per-transaction cost which has a lot of impact on their profitability. This leads to the businesses demanding or leaning on cash payment mode which is a limited option for them considering the given digital era.

4.    Unavailability of Loans

         Many MSMEs across the country are unaware of the loaning options available to them. As most MSMEs come from the rural belt of India, there is a low chance of people taking their time to learn and understand the resources available to them. Taking an MSME loan from banks might come at heavy interest rates and may include extensive and exhausting paperwork and documentation which is usually time consuming. Many a times, a small business owner does not have the required security to pledge to procure a secured loan. MSMEs can educate themselves about MSME collateral-free loans and other unsecured loan options offered by NBFCs. This way, availing an unsecured loan, also known as collateral-free loan can prove beneficial while overcoming this challenge.

What are the characteristics that SMEs can adapt to that will help them keep growing despite the challenges they face?

● Protecting important customer accounts
● Being hungry for growth even in crisis
● Being prepared to develop management capabilities
● Embracing new technology in different aspects of business
● Holding onto key employees

SMEs already face a lot of problems due to a lack of access and awareness. However, the first and the second layer of the pandemic has added to the stress of these business owners. From this, we all know that 2020 and 2021 have been stressful years for SMEs but only those who have fought and stayed by taking strong and analytical financial decisions have survived and come up.

Moreover, with all these decisions, it is important to have a strong financial backup to survive and grow your business in today’s competitive market. This can be achieved by taking the help of loans provided by NBFCs to SMEs. These loans are usually under the unsecured category but the SMEs have to meet certain eligibility criteria to get loans which are established to cut down the risk that lenders have while lending unsecured business loans. The government is also taking initiative to provide credit facilities to SMEs by setting up various MSME loan schemes such as Pradhan Mantri Mudra Yojana (PMMY), PMEGP, and CGT MSE. Depending on the requirement, there are various MSME Loan schemes available to help businesses overcome the challenges they face.

A lot of these SMEs problems have solutions. If we have to give the example of digital acceleration, businesses can focus on using data and technology to improve different aspects of their business models. Small and medium business owners can also, if possible, take the help of professionals for financial assistance. These experts can help in areas like improvement of the cash flow as they offer accounting, tax, and advisory services. Another solution for the SMEs problems is to retain their important employees and grow with them by providing good job opportunities, better work-life balance and career opportunities.

Running a small or a medium-sized business can be a difficult task but with the right solutions and help by side, SMEs can thrive very well in the business market.

Posted on