What is a disadvantage of the CAPEX payment model?

In the context of the CAPEX (Capital Expenditure) payment model, a key disadvantage is the budget limitations for upfront costs. This model typically requires a substantial initial investment for the purchase of assets, which can strain financial resources. Organizations may find it challenging to allocate such large sums of money at once, particularly if they have other ongoing operational costs or investment needs.

The need for significant upfront capital can also lead to cash flow issues, particularly for smaller companies or startups that may not have the liquidity needed to invest heavily in infrastructure or equipment right away. This disadvantage can affect the organization’s ability to respond to market changes or invest in other opportunities, as a considerable portion of the budget is locked up in fixed assets from the onset.