10 Biggest Challenges Faced by MSMEs in India (and Solutions)

The challenges faced by MSMEs in India continue to be a deciding factor between survival and scalable growth. Even after contributing 30% to India’s GDP and employing over 110 million people, micro, small, and medium enterprises still fight daily battles that larger corporations never face.

Here are the top 10 challenges faced by MSMEs in India right now (as of 2025) along with realistic, actionable solutions that thousands of entrepreneurs are already using successfully.

1. Access to Affordable Finance – The Eternal Roadblock

Despite schemes like MUDRA, CGTMSE, and PMEGP, most MSMEs still struggle to get collateral-free loans quickly. Banks reject 40–50% of MSME loan applications due to poor credit history or lack of documentation.

How to Overcome:

• Build a strong credit score early (even personal CIBIL matters).
• Register on the Udyam portal and apply through the CGTMSE scheme (up to ₹2 crore collateral-free).
• Explore alternative lending platforms and NBFC partners that offer revenue-based financing.
• Prepare a solid business plan and 2-year ITR + GST returns – this alone increases approval rates by 60%.

2. Delayed Payments from Buyers

Over 70% of MSMEs face delayed payments, with invoices stuck for 90–180 days. This creates a severe working capital crunch.

How to Overcome:

• Use the MSME Samadhaan portal to file delayed payment cases (many recover money within 90 days).
• Shift to TReDS platforms (RXIL, M1xchange, Invoicemart) for invoice discounting at 6–9% interest.
• Include late-payment penalty clauses (2–3% per month) in every contract.
• Offer 1–2% early payment discount to encourage faster settlements.

3. Intense Competition from E-commerce Giants & Imports

Cheap Chinese imports and heavy discounts by Amazon/Flipkart make it impossible for local manufacturers to compete on price.

How to Overcome:

• Focus on “Make in India for Vocal for Local” branding.
• List products on ONDC, GeM, and IndiaMART for government and B2B orders.
• Differentiate through customization, quality certifications (ISO, FSSAI), and faster local delivery.
• Join export promotion councils – many MSMEs now earn 30–40% revenue from exports.

4. Lack of Digital Adoption & Technology

More than 60% of MSMEs still run on pen-and-paper or basic Tally. They lose customers because they aren’t visible online.

How to Overcome:

• Claim your free business profile on top directories like Dhurla.com – it helps customers discover you instantly.
• Start with affordable tools: Google Business Profile, WhatsApp Business API, and free CRM like Zoho One (free for 3 users).
• Use the Digital MSME scheme – get up to ₹12 lakh subsidy for ERP/cloud solutions.
• Outsource digital marketing initially instead of hiring full-time staff.

5. Regulatory & Compliance Burden

Frequent GST, labor law, and environmental regulation changes confuse most small owners.

How to Overcome:

• Hire a local CA or compliance consultant on a retainer (₹5,000–10,000/month).
• Use automated tools like ClearTax, Tally Prime, or CompBooks.
• Attend free workshops by DIC (District Industries Centre) and MSME-DIs.

6. Skilled Manpower Shortage & High Attrition

Finding and retaining trained workers remains a nightmare, especially in Tier-2/3 cities.

How to Overcome:

• Partner with local ITIs and polytechnics for campus hiring.
• Offer ESIC + PF from day one – this reduces attrition by 30–40%.
• Implement the Apprenticeship Act (NAPS) – government pays 25% of stipend for first year.
• Cross-train existing staff and create clear growth paths.

7. Inadequate Marketing & Branding Budget

Most MSMEs believe “word-of-mouth” is enough. In 2025, that’s a guaranteed way to stay small.

How to Overcome:

• Create short video content on Instagram Reels & YouTube Shorts (cost < ₹10,000/month).
• List your business on trusted platforms like Dhurla.com to appear in local searches.
• Run hyper-local Facebook/Instagram ads (₹300–500/day budget works wonders).
• Join industry associations and exhibit in local trade fairs.

8. Supply Chain Disruptions & Raw Material Price Volatility

Post-COVID global issues and the Russia-Ukraine situation still affect prices of steel, polymers, chemicals, etc.

How to Overcome:

• Maintain relationships with 3–4 alternate suppliers.
• Use bulk buying through MSME clusters or co-operatives.
• Hedge raw material prices where possible (many commodity exchanges now allow small lots).
• Keep 60–90 days of critical inventory if cash flow permits.

9. Limited Access to Government Schemes & Benefits

Thousands of crores remain unclaimed every year because owners don’t know or don’t apply on time.

How to Overcome:

• Register on Champions Portal (champions.gov.in) – single window for all schemes.
• Follow official MSME Ministry Twitter/LinkedIn handles for real-time updates.
• Appoint a local Business Development Service Provider (BDSP) – many work on success-fee basis.

10. Succession Planning & Family Business Conflicts (Unique to India)

Second-generation entrepreneurs often lack interest or vision, leading to closure after the founder.

How to Overcome:

• Start professionalizing the business early – bring independent directors or mentors.
• Document SOPs and create an employee-first culture.
• Consider selling to PE funds or larger players at the right valuation instead of forced closure.

Final Thoughts: Turn Challenges into Growth Opportunities

Yes, the challenges faced by MSMEs in India are real and often brutal. But 2025 is also the best time in decades to be a small business owner in India. With ONDC, Digital India, PLI schemes, and a booming startup ecosystem, the tools to succeed have never been more accessible.

The only question is: Will you stay stuck complaining about the problems, or start implementing solutions today?

Quick 30-Day Action Plan for Every MSME Owner:

1. Register/Update Udyam certificate (free)
2. Create Google Business Profile + list on Dhurla.com
3. Open account on at least one TReDS platform
4. Attend one local MSME clinic or webinar
5. Prepare last 2 years’ financials cleanly

Take the first step today. The next success story could be yours.

Help your MSME grow faster – Get listed on India’s fastest-growing business directory → https://dhurla.com today!