How Equipment Leasing Works
Leasing medical equipment works in the same way as leasing a car. By entering into a lease, you have the right to use the equipment without the burden of ownership. The advantages of a lease are lower payments as you’re paying for only a portion of the assets, reduced upfront costs (if any), flexible end of term options.
In the medical device market, the typical lease term is between three and five years. At the end of the initial term, you have the option to purchase, renew, extend, or return the equipment. As a technologically driven field, leasing medical equipment often proves to be one of the most financially efficient ways to ensure your practice or facility has up to date equipment without tying up significant capital and efficiently manage their cashflow.
How Equipment Financing Works
Equipment financing refers to the practice of taking out a loan to pay for equipment over time. By choosing to finance equipment, you will eventually own the asset outright. This works well for organizations with strong credit and for mature technologies or for assets with a long life expectancy.
Financing is popular, in part, due to restricted capital budgets. While most equipment financing is collateralized debt, the loan amount may impact your available line of credit. Since medical equipment, such as CTs and MRIs, can cost several hundred thousand dollars, the best practice is to work closely with your financing partners.
Advantages of Equipment Leasing
Control and conserve cash---You avoid the upfront costs of purchasing equipment and the lease becomes a fixed monthly line item which can help you allocate financial resources more effectively.
Built-in life cycle management---Leasing affords you the option to upgrade your medical equipment more frequently, with lease terms typically between 3 and 5 years. This is not only beneficial for patients, but can greatly improve operational efficiency as well. Equipment leasing allows for items which may be nearing the end of their operational life, to be readily replaced as the normal course of business.
Maintain strategic flexibility---Large capital purchases can tie you into a specific strategy or technology. Leasing medical equipment enables you to adapt as the industry evolves and increases flexibility for you and your organization.
Quick and simple application process---approval and execution of a lease can be quick and easy.
Advantages of Equipment Financing
Acquire medical assets with little or no immediate cash outlay. You will not have to part with a large lump sum payment to acquire the equipment. The capital you conserve can then be allocated to other areas of your organization.
Ownership. After the terms of the loan are satisfied, the title will pass to you, the owner. For mature technologies and equipment with a long useful life, this will help you maximize your return on investment.