Effect of Covid on small businesses

How Has Covid-19 Affected Small Businesses In India?

March 19, 2022 • 14972 views

COVID-19, a once-in-a-century pandemic, hit the Indian economy hard and affected almost all sectors. While nearly all businesses have borne its brunt, small businesses in India, which are the backbone of the economy, have suffered even more as they operate on thin profit margins and low liquidity. Read on to learn about the impact of COVID-19 on small businesses in India.

Negative impact on the majority of small businesses in India

According to a report, more than 82% of small businesses in India have been affected negatively due to COVID-19, with those in the manufacturing sector experiencing more troubles. The survey conducted among 250 companies also found that 70% of businesses feel that it will take them at least a year more to recover from the pandemic blues and go back to demand levels before the emergence of COVID-19.
Note that globally, India has been one of the worst affected countries due to the pandemic. Just as things were slowly getting on track, the country was hit hard by the second wave that proved to be worse than the first. This forced state governments and local authorities to impose mini lockdowns, hampering production and operations.

Challenges for small businesses in India due to the pandemic

Shrinking revenues

Small businesses already operate on thin profit margins. The resultant lockdown due to COVID-19 took a toll on their revenues, throwing them in the face of an existential crisis. A prominent credit rating agency pointed out that the margin of small businesses would contract by 200-300 basis points, especially for the micro-segment.

Shrinking margins mean companies can face issues related to working capital, thus missing out on their commitments. However, a small business loan after COVID-19 can help them overcome this challenge to a great extent.

Low creditworthiness

Shrinking margins will also hinder the creditworthiness of small businesses, further enhancing their liquidity problem, something that they have been grappling with for a long time. With creditworthiness and liquidity under pressure, small businesses will find it challenging to meet day-to-day needs and complete existing and new orders coming their way.

The positives and the way forward

While the pandemic has affected small businesses negatively; on a positive note, it has bolstered the pace of digitisation. Nearly 82% of the surveyed businesses have digitised their daily operations, which has helped them reduce costs and boost competitiveness.

While the Government of India has come up with relief measures for Small and Medium Enterprises (SMEs) suffering the brunt of the pandemic, there’s still a long way to go, for things to normalise. To scale businesses, SMEs need better market access and finance at their disposal. This is where getting a customisable business loan after COVID-19 can be helpful in expanding operations.

How did Business Loans help After COVID-19?

As evident, businesses are already under tremendous pressure on the liquidity front due to the pandemic. A business loan gives them the much-needed funds to meet their working capital needs at a competitive interest rate and collateral-free.

Relaxed repayment tenure facilitates easy repayment, and in most cases, there are nil foreclosure charges. Perhaps, the biggest advantage is the quick disbursal of funds as the loan warrants minimal documentation. With money at their disposal, businesses can address a range of needs, including paying vendors, fulfilling new orders, undertaking digitalisation processes, etc.

At the same time, with adequate money, they can implement strict COVID-19 measures within premises, including regular sanitisation and tweaking infrastructure in a manner that ensures social distancing, among others.

If you are a small business entity looking for a cost-effective business loan scheme after COVID-19, Poonawalla Fincorp offers unsecured business loans for SMEs and MSMEs on easy terms and conditions.


We take utmost care to provide information based on internal data and reliable sources. However, this article and associated web pages provide generic information for reference purposes only. Readers must make an informed decision by reviewing the products offered and the terms and conditions. Business Loan disbursal is at the sole discretion of Poonawalla Fincorp.
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poonawalla fincorp team

Poonawalla Fincorp Team

Our team of expert writers and editors are passionate about providing authentic and valuable information on finance. Our aim is to simplify financial and finance-related concepts. We strive to help our readers become more aware and empowered to make informed financial decisions.

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