It doesn’t matter whether you’re part of a small organization or a huge one – material handling equipment financing is a major part of your operations. Being able to fund the purchase of large equipment is something that can make or break a business and those that can’t manage it, often struggle to progress.
Of course, while the concept is riddled with advantages, it’s worth being aware of some of the drawbacks as well. Financing is going to be on the agenda for the majority of businesses but if you happen to be sat on the fence about the matter, let’s take a look at the pros and cons in detail through this page.
The advantages of material handling equipment financing
In truth, this is really all about why a company would opt to finance their material handling equipment in this way. To describe the concept in simple terms, it’s a bit like a mortgage for your equipment. In other words, if you default on the loan and can’t make the repayments, the lender has the ability to take the equipment as collateral and you’re back to square one.
The reason so many companies are opting for this approach is because equipment of this ilk is obscenely expensive. The prices are obviously going to differ by industry but suffice to say, they can affect your balance sheet by huge amounts.
However, most of this equipment tends to be bought for the long-term. It means that when you have paid off the loan, the equipment will still have some value. This means that you can continue to reap the value by using it, or sell it and take something back. Both are going to look favorable for the balance sheet at this point.
The disadvantages of material handling equipment financing
As you can see, there are some really clear advantages to buying equipment in this manner and as we have reiterated through the guide, this is an approach that can really take a business to the next level.
It’s also an approach which isn’t going to be suitable for everyone. For example, it’s generally recommended not to finance equipment of the tech variety in this manner, for the simple reason that this depreciates in value very quickly. This is because updates are regularly released and what may have been brand new last year, is completely out of date now. If you’re still financing such a device, it’s not very efficient to say the least.
Another drawback that some companies hone in on is the potentially large monthly repayments. Sure, this is going to depend largely on the type of equipment you are purchasing, but for some businesses it might be off-putting and hurt their finances too much. Of course, when you consider the alternative of simply not purchasing the equipment, this could also be of a huge hindrance to their business and as such a happy medium has to be created at some point.