Purpose: Sri Lanka is rich in resources but vulnerable to economic stability. As believed, entrepreneurial development is one of the mechanisms for economic recovery, the study aims to determine the factors that act as an entrepreneurial barrier and their impact on the failure of small and medium enterprises in Batticaloa District. Design/Methodology/Approach: A quantitative approach is used. A structured questionnaire was administered to collect the data from 200 entrepreneurs of SMEs. Non-probabilistic convenience sampling was used, and SPSS was used to analyze the data. Descriptive Analysis, regression, and correlation analysis were performed. Findings: The findings of this study show that financial barriers, economic barriers, knowledge barriers, cultural barriers, and infrastructure barriers are significantly and positively associated with organizational failure. Originality/Value: The study intends to identify the barriers faced by entrepreneurs that affect the growth and survival of SMEs. The author recommends how the entrepreneurial barriers can be minimalized through better policy decisions.