By Jeff Holt, VP, Senior Healthcare Business Banker with PNC Bank
To provide your patients with high-quality care, you need to stay up-to-date on the latest advances. And to do so, that often means having the right equipment. You’re familiar with the hefty price tags attached to this equipment, which puts you in the position of having to decide whether to lease the equipment or buy it outright.
With rates to keep rising now may be even a better time to consider what needs to be purchased, what the best financing option is, and what is your ROI. Both leasing and purchasing have positives and negatives, and these vary according to the specific equipment you’re considering. Renting is, at least at first, the more affordable option,1 but you need to think about the long term if you can. Here are some factors to help you make the decision.
Some of the pluses of renting versus buying:
- Since you haven’t committed to ownership, you have the option to upgrade to newer technology as it becomes available.2
- You can evaluate the equipment as you use it, and change to another brand or model without repercussions. (Note: You should examine your lease agreement carefully before signing it. 3)
- Many leases include maintenance as part of the agreement, potentially saving you money and the hassle of finding someone to make repairs.4,5
- Buying equipment usually involves a time-consuming process of applying for credit.6 But when you start to consider how long you’re going to have and use this equipment, and how necessary it is to your practice, other issues may come to the forefront.
KEY BENEFITS OF EQUIPMENT LEASING
Mark Tambussi, senior vice president and national manager of PNC Healthcare Finance said, “Providers across the country have discovered equipment leasing offers several benefits for the entrant into a new revenue stream, but we’ve found there are four key reasons to lease – 100% financing, improved cash flow, flexible structures and plans for technological advancement.”
Let’s break those benefits down:
- 100% financing can preserve your precious capital and budget dollars. Also with a lower initial investment in new service lines, equipment financing can allow your new offering to be financially accretive…faster.
- Improved cash flow can result. An affordable monthly payment for equipment/tenant improvement can support a separate P&L for the new service line.
- Flexible structures, including leases and structured loans, can allow you to pay for what you use rather than tying up capital in a rapidly depreciating asset. Equipment Finance also provides possibilities for early replacement, easy moves, additions and changes where traditional financing can fall short or add significant expense.
- A plan for staying on the cutting edge: Equipment Finance is not just a finance structure, it’s a plan; a plan to evaluate the assets required, how they are used and disposed of. And then develop a diverse finance strategy to acquire assets for a low monthly payment that supports your need to remain on the leading edge of technological advancement.
Broad asset coverage that can help drive better ROI across most asset classes and better financial performance in your new operating unit.
Some of the drawbacks of renting versus buying:
- If this equipment is necessary to run your practice and you use it over many years, you’ll end up paying more in rental or lease fees than you would if you purchased it.7
- The equipment won’t count as an asset to your practice should you ever decide to sell.8
CHOOSING A FINANCIAL RESOURCE
Once you determine that equipment finance might be a viable alternative, choosing a financial resource with deep healthcare experience is critical. More than in-depth knowledge of the assets, manufacturers and vendors of healthcare, an appropriate financial resource must demonstrate capital strength, depth of product offering and, perhaps most importantly, deep experience structuring financial transactions.
About the author:
Jeff Holt, CMPE, vice president and local senior healthcare business banker for PNC Bank, has been with PNC for 30 years and has over ten years’ experience servicing only healthcare clients. Through this role, he supports dental, medical, and veterinary practices with practice transition support services, and revenue cycle enhancements involving specialized lending and healthcare banking services in Central Florida to the Gainesville area. He can be reached at 352.385.3800, or via email at firstname.lastname@example.org.