Buying heavy equipment by paying hard cash has now become almost obsolete. No one wants to invest all their reserves into buying heavy equipment and keep their money locked there. They know that by paying hard cash to buy heavy equipment, they will not be able to meet other financial obligations which would be perhaps more important than anything else. Therefore there is no point in keeping the money tied where you have options to take loans from financial institutions to buy construction machines and pay them every month. Contractors big or small have now made this as a mandate of their business. They do not invest their reserves into buying heavy machinery and rely on financial institutions to lend them money to buy machines. This is the reason why almost every contractor as well as owners of construction companies tries to keep their credit rating healthy. This will enable them to get loans without any hassles.
Not paying your dues can lead to repo:-
If you think that non-payment of the monthly dues can only affect your credit score, then you will be rather alarmed to know that the banks have the authority to claim the machine back citing the reason as non-payment of monthly dues. Though they do not take such stringent actions immediately and allow the borrower to arrange for funds. Normally, borrower who has the intention to clear the debts but for some reason is unable to pay the due for a particular month can inform the bank well in advance. This results in increasing the chance for the bank to waive off any late payment fees. The borrower will have to pay the interest of the due but that is still manageable. However, for borrower who just does not want to pay the dues, the banks do not have any option other than to repo the heavy equipment.
One fine morning your machine is gone:-
Your bank might send you several notices to pay the due but if you ignore them and do not communicate with the bank, the bank will contact the repossession team who will just come to your construction site or the place where you have the machine and will tow it away. The repo team may or may not inform you about their arrival. Generally, they do not inform the borrower about their arrival and they will slyly tow the machine and bring it in their possession. You can’t complain the policy as the bank has first lien on the machine and since you have failed to pay installments for months they have every right to repo your machine. Therefore, it is recommended that you allocate some funds out of your business to pay your monthly dues rather than facing the music.
Business will suffer:-
Once the heavy equipment is taken by the bank and you do not have machine to work, your business will suffer severely. Construction companies never take this risk. It only makes matter worse for them.