The present study is an attempt to identify the financial issues of SMEs of Pakistan. Pakistan’s cotton ginning industry has chosen as a case. The general objective of the study is to analyze the financing issues/problems of the small‐scale industries (cotton ginning) with appropriate alternatives and financing solutions. The extensive theoretical framework about financing of SMEs along with seven hypotheses (for testing) has been included in research work as base of study. Data collection has performed through both primary and secondary sources. Both qualitative and quantitative research methods have been employed for the research work. For this research work, sample size of 30 cotton ginning factories has selected from the population of 1400 cotton ginning factories of Pakistan. The researchers have selected the cotton ginning SMEs of Faisalabad Division by keeping in view the importance of Faisalabad division as 2nd largest industrial city and 3rd largest cotton producing division of Pakistan and the factor of easy access (for researchers) to the chosen factories. Statistical data analysis techniques are used to analyze the data which was collected through questionnaire’s survey from SMEs and the results have presented with hypothesis testing. After identifying the financial issues the alternatives, financial solutions and recommendations have been given for policy measures. The findings of research work indicates that high interest rate on loans, heavy taxes, poor government policies, owner’s education level, old technology and poor legal and accounting self‐ efficacy are the major reasons of financial problems. Soft and friendly government policies, short and long term loans at lowest interest rate for running and technology up‐gradation are recommended. Joint ventures are found to be the most suitable alternative for financial solutions.