1. Finance: The most serious problem faced by SSIs is that nonavailability of adequate finance to carry out their operations. Small scale sector lacks the creditworthiness and collateral required to raise capital from the capital markets or financial institutions and hence they depend on local money lenders who charge high interest rates. 

2. Raw materials: Another major problem of small business is the procurement of raw materials. If the required materials are not available, they have to compromise on the quality or have to pay a high price to get good quality materials. They purchase raw materials in small quantities due to lack of storage capacity and hence their bargaining power is low.

3. Managerial skills: Small business is generally promoted and operated by a single person, who may not possess all the managerial skills required to run the business. Many of the small business entrepreneurs possess sound technical knowledge but are less successful in marketing and may not find enough time to take care of all functional activities. 

4. Less productive labour: Small business firms cannot afford to pay high salaries to their employees, which affects employee willingness to work. Thus, productivity per employee is relatively low and employee turnover is generally high. Small business organizations are unable to attract talented people because of lower remuneration. Division of labour cannot be practiced in small scale units, which results in lack of specialization and concentration.