Small scale industries face the following problems:
1. There exists lack of funds for people starting in this sector as investment is mostly self-financed and the other source of funds can be from moneylenders or local financial agencies or agents.
2. Small industries often face shortage of raw materials due to unavailability of finance, also the lack of a proper supply chain and logistics in rural areas results in shortage of raw materials that hinders proper functioning.
3. As the wages are less, they are able to hire semi-skilled labourers which results in lack of talented manpower that impacts their efficiency.
4. The small scale industries are unable to spend more on marketing due to lack of funds.
5. The products need to be sold in the market and this is done by help of middlemen, that leads to eating away of profit.
6. There are many small scale industries that make use of outdated and also obsolete. It lowers productivity and renders operations non-feasible.