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Leasing Gives Providers a Way to Acquire Medical Equipment

Aug 18, 2007
Leasing gives the healthcare provider the opportunity to enjoy the exponential growth rate of medical equipment technology. The medical community may now offer diagnoses based on information about a patient's condition that we couldn't accurately obtain using older equipment. The problem is that most organization's capital budgets just can't keep pace with the quickening of technology advances.

The problem is getting worse

If you're like most medical care providers, you are facing the dilemma of how to provide cutting-edge care to your patients but don't have the financial reserves (cash or credit) to make the purchase of new equipment. One could argue that it is economics that slows down the delivery of medical care. Standard accounting practices allow for the assets to be depreciated over five years. What do you do when the equipment needs to be replaced in some amount of time less than five years? One option is to try selling the outdated equipment on eBay or somewhere else in the open market.

There is a better solution

There is another option that many astute organizations use. They simply lease the equipment. Why lease? It's all about cash flow. Typical leasing standards require you to put just two payments down in cash. In addition, an operating lease will allow you to write 100% of the cost of the equipment as expense on your firm's income statement. By treating the asset as an operating expense you don't have to deal with depreciation on the leased medical equipment. Plus the lease does not show up on your credit report, possibly freeing you to make other necessary purchases.

Is leasing for you?

While most organizations need to be in business for at least 3 years, savvy shoppers can find leasing companies that have no time-in-business requirements. Even without documenting your financial statements, you should be able to enter into leases up to $150,000. By providing a bit of financial information, you can lease items with a much higher dollar figure.

Does this sound like a viable option?

Typical lease terms are two to five years, and are affected by the typical useful life of the item you are leasing for your business. Some leasing companies have the flexibility to buy back newly acquired equipment assets and convert them into leases. Do you normally pay shipping, installation, training and other soft costs on top of the actually hardware? You can search out leasing companies that will include these items in the lease. Have a lease with unfavorable terms? Most do not know it, but you can actually refinance leases into one with more favorable terms. Be wary, however, of expensive penalties that may be outlined in the lease agreement.

If you're strapped for cash, or just want to conserve it for other business purposes, leasing will enable you to obtain a much needed piece of business (medical or otherwise) equipment without a large outlay of cash.
About the Author
Kent Harlan has been a CPA since 1984 and is the owner of Ozarks Capital Funding, a firm offering financing in the areas of accounts receivable factoring, equipment leasing , and financing for healthcare providers .
http://ocflink.com
kenth@ocflink.com
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