Small scale industries has been considered as device of economic growth and development in many developing countries and this constitute the backbone of an economy in maintaining a significant growth and in generating employment opportunities. The Government of India declared that ` 500 and ` 1000 notes will be no longer legal tender from midnight, 8th November 2016. This move is expected to cleanse the formal economic system, discard black money and counterfeit notes. The small business units who largely depend on Cash related transaction on daily basis witnessed more disturbances. Therefore an attempt has been made to identify the problems faced by the small business units and give suggestions to improve the working of small business units which were affected by demonetization in Coimbatore city. The study revealed that most of the respondents were unhappy about the implementation of demonetization because they faced loss due to cash crunch and had a great impact on their small business activities and their standard of living.