5 Challenges Faced by MSME in India + Effective Solutions

Bullit Team | 2025-10-08

According to SIDBI, MSMEs contribute nearly one-third of India’s GDP.

But here’s the irony - a majority of MSME founders still struggle for the basics: Credit, Compliance, and Customers.

You’re the first to open shop, the last to shut down, and the ones hustling between suppliers, banks, and buyers. The roadblocks are real, but so are the solutions.

In this blog, we discuss the top challenges faced by MSMEs in India and how founders can overcome them for efficient business growth.

Key Challenges Faced by MSMEs in India
1. Access to Finance
2. Delayed Payments
3. Technology Gaps
4. Regulatory Compliance
5. Market Access
Conclusion

Key Challenges Faced by MSMEs in India

Before we dive into solutions, let’s clearly identify the roadblocks.

Every MSME, regardless of the industry, encounters the same five key challenges: finance, delayed payments, technology adoption, compliance, and market access.

Here are the key challenges faced by MSME sector in India and how you can crack them one by one:

1. Access to Finance

Banks still see MSMEs as “high-risk.” This is because a majority of MSMEs have poor credit history and auditing.

Add to that - collateral requirements, long paperwork, and lack of a credit trail. For founders, getting a loan becomes a nightmare

Solution:

Tap into collateral-free schemes like CGTMSE, Bank Credit Facilitation Scheme, or PCR for improving performance and credit rating.
Build creditworthiness through a secured credit card or small-ticket fintech credit lines before applying for bigger loans.
Explore MSME-focused platforms like Bullit that help arrange quick, authorized, and hassle-free loans from NBFC, lenders, or enablers.

Start small. Even a collateral-backed credit card builds a track record that makes larger loans easier.

2. Delayed Payments

The 60-90-day payment cycle leaves MSME business founders cash-strapped.

Often, this cycle gets stretched by buyers, which hampers business operations and ends up disturbing the entire cash flow, leading to administrative problems.

Solution:

Benefit from the MSME Samadhan portal to raise claims for payments delayed beyond 45 days.
Take advantage of the TReDS platform for invoice discounting.
Leverage fintech credit lines that plug the cash-flow gap while you wait for dues.

Remember: The MSME Act is on your side. Never hesitate to enforce it and ease your cash flow.

3. Technology Gaps

Niti Aayog’s latest MSME Competitiveness Report reveals that 90% of MSMEs are unregistered and refrain from registering due to high compliance costs, paperwork, and credit access.

As a result, many MSMEs still operate on manual processes, losing time, efficiency, and competitiveness.

Additionally, MSMEs lack technological advantage over their competitors, which keeps them away from upgrading their machinery, scaling, product design, testing, equipment, and processes.

Solution:

Avail technology help from schemes like CLCSS for purchasing new machinery & equipment via subsidies on capital.
Export Promotion Capital Goods scheme for importing capital goods to enhance manufacturing
MSE-CDP for accessing pooled infrastructure, technology, testing centers, etc
Testing fee reimbursement scheme for reducing the cost of product testing
Design Scheme & Design Clinic for product design & development
Digitalize your MSME by being part of the TEAM initiative & the Digital MSME initiative.

Think of digitalization as an investment, not a cost, because it pays back in saved hours and fewer errors.

4. Regulatory Compliance

The fourth challenge faced by MSME sector in India is compliance with the government’s regulatory reforms.

GST, TDS, MCA filings, Udyam registration, labour laws, and the paperwork never seem to end for MSME founders. Miss one deadline and penalties pile up.

Solution:

Register for UDYAM to formally recognize your business and access government scheme benefits.
Automate GST/TDS filing through compliance platforms.
Subscribe to MSME-focused platforms like Bullit, which simplify compliance and keep you loan-ready.

Remember: Compliance = credibility. Lenders and buyers trust MSMEs with clean records.

Facing issues while registering for Udyam? Explore our detailed Udyam Registration Process Guide and get your Udyam Certificate today!

5. Market Access

MSMEs face severe competition from large firms & cheaper imports. Since they’ve limited branding & market presence, their reliance on local markets comes at a cost - inability to scale beyond a certain limit.

The Fix:

Register on the GeM portal to sell directly to government departments.
Explore export promotion schemes like EMP, CBFTE, and RoDTEP, and marketing schemes like MATU and MAI.
Explore domestic markets through schemes like Single Point Registration, Domestic Market Promotion, and PMS.
Invest in branding and digital marketing to build visibility beyond your local market.

Remember: Visibility drives credibility. The more discoverable your business, the stronger your chances of expansion.

Conclusion

Finance, compliance, technology, markets, etc. - there’s an endless list of challenges faced by MSMEs in India.

However, every challenge is also a lever. Good credit history builds your track record. Compliance builds your credibility. Digital tools buy back your time. Market access builds your scale.

With the right tools, credit lines, and compliance hacks, you can flip the script. At Bullit, we empower MSME founders in shaping their business growth journey.