Where there are many advantages of equipment finance like commercial equipment finance, truck finance, Earth moving machinery by working with commercial finance brokers in Melbourne, here are some of disadvantages are also showing their faces in the crowd of benefits. Definitely a financer who is investing in a heavy duty and expensive equipment, he is also generating some profit by investing large amount, he is also worried for equipment as he takes the ownership and depreciation. Therefore some of limitations, are signed at the time of leasing equipment, which are as follows.
- HIGHLY EXPENSIVE.
Monthly or yearly rentals are paid by the lessee to the lessor it also include a very good margin for lessor as he is the owner of the equipment and risk is also belonging to him. Hence most of the time it is considered that equipment financing is high cost financing.
- RESTRICTIONS IN THE USAGE OF ASSET.
While signing the Equipment Finance Agreement, it is possible that the financer can include some utilization restricted of the financed equipment/asset. In such an instance, lessee will have to be careful for the restricted usage of the equipment/asset. Furthermore if in any case lessor’s financial position is going weak and noticed that soon the lessor will be bankrupted so the lessee could not arrange equipment very immediately for running his business activities.
Incase lessee is unable to generate profit with equipment financed, and breach the contract agreement before expiry so lessee has to pay penalty decided in agreement to lessor. It is a big advantage to lessee as he already did not generate any profit with equipment.
There is no appearance of lease in statement of financial position of an organization still from the point view of investors that it is a debt and they include leases while valuating business.
By equipment financing you do not own the equipment it means that you cannot rent it, transfer to someone, sell, or pledge it. It depends of the terms and condition if given in agreement that you can purchase the equipment (vary case to case).
- MAINTENANCE COST.
During the lease period lessee has to bear the maintenance cost even if asset is not owned by lessee at the end of lease.
At one side equipment financing is fruitful for the business growth due to low purchasing power of the company by financing such an equipment which is necessary for business growth to remain stable in the market competition, but the above mentioned disadvantages se also to considered while financing an equipment. Allover it depends on the business nature and owner wish that either he can manage profit by equipment financing or he will suffer from loss. For more information, please log on to https://www.atlasef.com.au/instant-finance/engineering-equipment/.