When it comes to allocating limited recourses, healthcare decision makes usually faces some continual challenges. Whatever the best medical equipment technology is offering, patients often demand the best. But, when it comes to the equipment, they are generally quite expensive.
In regards to medical technology, capital budgets typically fall way short of the requests. Prior to making a decision, it is very important that every aspect of the equipment purchases and financing can be carefullyconsidered, and this is where medical equipment leasing comes into play.
Equipment to purchase:
It can be a daunting task when it comes to in and of itself while deciding on the type of material required. Say suppose you are planning to buy a CT scanner, and it is quite an expensive one to get this time. You might also come across the supplier who is selling the refurbished equipment which had approached you.
You will surely come across a shop selling refurbished products that are merely sky-rocketing in terms of prices. So how on earth will you be able to cut down the cost of equipment purchase so that you are not creating a hole in your pocket? There are several questions that you need to keep in mind while you are going ahead with a decision.
The next challenge will be to decide what will be the optimal way of having it financed once you have decided on the type of medical equipment to be acquired. The most popular ones are borrowing the funds from the lender or leasing the equipment as several options are available.
Medical Equipment Leasing:
To have the lower monthly payments than buying the equipment outright and financing it through a lender is what equipment leases usually run like and mainly from three to six years. This is because the lessee is usually paying for the use of the equipment during the term instead of owning it. Leasing also offers 100% financing as there is no down payment, and the first payment and the security deposit are all equal to the payment that is made. Providers are now able to improve their cash flow and are more likely to match the revenues with the expenses since the fees are usually lower. Leasing is also offering the advantage of writing off the entire lease payment from a tax standpoint.
The main advantage behind the medical professionals choosing to go ahead with leasing is that due to its flexibility. It includes maintenance, upgrades, and other services are how the lease can be negotiated. The provider will also have the option to purchase, renew, or return the equipment at the end of the lease term. Since it guards against equipment obsolescence, this is quite a significant advantage.
Medical Equipment Loans:
It might be a better alternative, while equipment obsolescence or cash flow is not an issue which is completely rare in this medical industry. The provider bears an asset that he can either continue to use or dispose of it over the open market at the end of the lease term. During the loan payout, borrowers also receive the tax benefits, such as depreciation expense on the equipment and the interest expense that has incurred.
The most typical method of valuing healthcare practices and hospitals is by using a multiple EBITDA, which are the earnings before interest, taxes, depreciation as well as amortization. Financing equipment through a lender might be advantageous as it would be resulting in a higher valuation than what if they had leased the equipment if a healthcare group is considering going public or are selling the business. It would be an “above the line” expense when it comes to leasing.
Personal guarantees through the owners are usually required with both medical equipment leasing and loans. For both the lessor and lender, this would provide the most comfortable level. The lender/lessor can attach the personal assets of the lessee for the balance of the loan or lease that is not satisfied by the liquidation of equipment if there is a default. It is for some obvious reasons that most of the providers do not wish to sign a personal guarantee.
The lender or the lessor will often abandon the personal guarantee requirement if the clinic or practice has a strong track record of profits for five years or more at the inception of the lease. That is the other point that should be negotiated.
Choosing a lender or lessee:
Within the equipment financing industry, competition is very fierce. It is advisable while acquiring the services of an independent financing consultant. Knowing which lender or lessee will be a good fit for your organization, a properly trained medical equipment financing broker will be analyzing your particular needs. To allow you to achieve optimal capital financing, he or she can guide you through the intricate details that concerns.