Medical Equipment Leasing Provides Optimal Financial Results

by : Kent Harlan

Medical equipment leasing is an excellent way for providers to allow their practices to acquire state of the art equipment. The medical profession is constantly changing, so in order to remain competitive, providers must continually upgrade their equipment packages.

Unfortunately, to outright buy or get a standard loan on the equipment requires a huge outlay of cash. Leasing solves the problem because no down payment is required, thereby allowing the provider to retain thousands (or hundreds of thousands) of dollars of capital.

A lease offers an alternative to traditional financing. With a lease, the equipment is owned by the leasing company. The practice makes payments to the leasing company in exchange for being able to use the equipment (i.e., essentially rental payments). Leases can be closed-ended, in which case the leasing entity retains the equipment at the end of the lease term. There are also open-ended leases, where at the end of the lease term a predetermined amount is paid to the leasing entity, and the practice attains ownership of the equipment.

Lease periods typically range from 24 to 60 months, so there is a great deal of flexibility to upgrade the equipment without a major capital investment.

There are many advantages to leasing medical equipment. There are no down payments, the application is relatively simple, and no restrictive borrowing covenants. In addition, leasing doesn't involve cross collateralization. Leases provide 100% financing with low rates for those with good credit. Other advantages include tax deductions and immediate write offs (depending on how the lease is structured), improved cash flow, fast processing, and better asset management. You usually get an option to buy the equipment at the end of the lease term at a stated amount or fair market value. Leases can also be written to accept lower payments during low volume cycles and can also provide an option for the lessee to make lower payments during the initial years and accelerate payments in the latter years.

Most any piece of medical equipment can be leased, such as x-ray machines, CAT scan machines, physical therapy equipment, computers, examination tables, lab equipment, and even waiting room furniture. Because of the many advantages of medical equipment leasing, providers are able to give the highest quality care to the public.

We advise using a financial broker to assist in the leasing process. A broker works to put the package together for the leasing company and helps the client sort through the myriad of options available.