The success of any medical or dental practice not only comes from the quality of care but also the ability to provide such care.
And with today’s ever-changing technological advancements in the healthcare field, having the right equipment is an absolute necessity.
Of course, medical equipment of any kind isn’t a small investment, so most independent practices must rely on medical equipment financing in order to make these purchases.
For just a glimpse at the expense involved, recent research shows that the global market for operating room equipment alone is expected to reach $48.5 billion by 2025.
If you’re considering any type of financing for healthcare equipment, read on to find out some of your options.
Why Do You Need Medical Equipment Financing?
Whether you’re an office manager for a dental practice or you run an independent hospital, you know that operating a medical facility is expensive, no matter the size.
There’s the facility itself, plus payroll, marketing, insurance, supplies, equipment, and more.
All of these costs are necessities for a one-office shop or multi-story institution and they simply scale up or down depending on the organization.
Perhaps the most expensive category is medical equipment because it’s in use every day and you simply cannot operate your business without it.
New advancements in technology are being made every day and eventually, you’ll need to upgrade your existing equipment.
In fact, three out of nine of Forbes’ 2018 healthcare predictions revolve around technological advancements.
Maybe you’re considering expanding your practice’s offerings or adding a location and you need the cash upfront to get the new office up and running.
In a worst case scenario, you may walk into the office one morning to find your X-ray machine completely out of order.
Planned or unplanned, you’ll likely need medical equipment financing sooner or later.
What Is Healthcare Equipment Financing?
Healthcare equipment financing allows you to take out a loan or lease in order to cover the costs of professional-use medical equipment.
Depending on the lender, you may qualify for a medical equipment loan structured in a number of different ways.
Luckily, most small business loans of any kind today come with a quick and easy application process that is completed entirely online.
Gone are the days of applying with a traditional bank and waiting weeks or even months to hear back.
Today’s online lenders are quick and efficient, often providing financing options within a day of submitting an application.
One of the perks of a medical equipment loan is that the equipment itself usually serves as collateral.
And once the loan term is complete, your lender releases their interest in the equipment and it is completely yours.
Another benefit is that many medical equipment loans allow up to 25% of the loan amount to be used towards soft costs, such as taxes, delivery, and installation.
If the lender charges an origination fee, that amount is typically deducted from the total funds before you receive them.
Loan terms are often flexible, and you may even be able to spread yours out over the expected life of the equipment.
What Is Medical Equipment Leasing?
One alternative to a medical equipment loan is medical equipment leasing.
Rather than paying to own the equipment outright, you essentially pay to rent the equipment for a specified term.
Monthly payment amounts are typically lower than a loan payment, and at the end of the term, you can elect to purchase the equipment from the lender.
You can also walk away and return the equipment if you wish.
Another upside to leasing healthcare equipment instead of taking out a loan to purchase it outright is that there’s usually a much smaller down payment (sometimes even none at all) and the qualification process is much less rigorous.
But if you plan on keeping the medical equipment to remain in your office or hospital, you’ll be required to pay a residual.
There are usually several buyback options when leasing medical equipment.
A popular choice is a hybrid lease-purchase agreement, where the buyback amount at the end of the lease term is something trivial like $1.
Other options (usually with lower monthly payments) include paying the current fair market value of the equipment at the end of the lease or renewing the lease altogether.
Another perk worth mentioning is that in many cases, the money spent on medical equipment leases and loans is 100% tax deductible up to $500,000.
Check out IRS Section 179 to see if your practice qualifies or ask your tax professional for more details.
How Can You Get A Medical Equipment Loan?
As a medical practice, applying for healthcare financial services has its ups and downs.
On the plus side, it’s a high-growth industry with an ever-increasing demand.
On the downside, running a medical office of any kind comes with a large number of overhead costs, which can impact your balance sheet and debt to income ratio.
To help strengthen your application for healthcare equipment financing, make sure you have good credit (both personal and business) and present a sound business plan for the use of funds.
It’s helpful to provide market research to prove the demand for such services, especially if you need equipment for a new specialty area or an additional location.
It also helps to have an established business of at least a year rather than using a medical equipment loan as part of your startup costs.
Individual lenders may also have specific revenue standards.
The medical industry is not only a growing one, it’s also an integral part of today’s society.
From specialty labs to general practices, communities are strengthened when comprehensive health services are available.
Financing your medical equipment shouldn’t be a barrier to success.
With so many financing options available, including both loans and leases, getting the equipment your patients rely on has never been more accessible.
By providing a strong business plan and comprehensive financials, you can almost certainly find a medical equipment financing solution that works for your practice.
Are you ready to consider medical equipment financing?
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