Krupa Market - Top 5 Reasons why MSMEs Should Use Formal Credit for Steel Procurement
How you finance steel purchases has a direct impact on your business operations. Steel is a high-value, repeat purchase, and the credit route you choose shapes cash flow, compliance, and supplier confidence. In this article, we break down the top five reasons why MSMEs should shift toward formal credit—ranging from predictable cash cycles and GST benefits to stronger distributor relationships and access to government-backed growth schemes.
Steel is one of the most critical inputs for Indian businesses. It isn’t a one-off expense; it is a recurring, substantial cost that influences both profitability and delivery commitments.
Most MSMEs face similar challenges:
Cash flow arrives slower than invoice obligations.
Freight and labour payments must be settled before clients release funds.
Suppliers often demand an advance to lock steel at a stable price.
When companies rely on informal lenders to handle these gaps, three issues arise immediately:
High, unpredictable interest charges
No documentation trail for GST or tax benefits
Lower credibility with major mills and distributors
Formal credit solves these problems. Facilities such as working capital loans, invoice discounting, and TReDS offer:
Stable and predictable cash flow for uninterrupted operations
Clean documentation that supports GST claims and audit requirements
Stronger trust with distributors—especially valuable when supply is tight
In simple terms, formal credit is more than just a source of funds; it is a strategic tool. It helps reduce the effective cost per tonne, ensures adherence to government norms, and strengthens a company’s ability to win contracts across both public and private sectors.
By the end of this explanation, you will see why formal credit makes steel procurement more stable, cost-effective, and dependable for MSMEs
.