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A Complete Guide to Understanding Medical Equipment Leasing and Financing

Whether you operate within a large hospital or a small private clinic, medical equipment leasing is becoming an increasingly popular and effective way for facilities to obtain the necessary equipment. Studies illustrate that the healthcare equipment leasing market will only continue to grow, increasing by around 7% in the coming year alone. The reason for this continued growth is in part due to the increase in competition between providers in the market, the evolving nature of the medical equipment itself, and different facilities’ limited budgets. So why are more and more facilities electing to lease their equipment and what exactly are the benefits of medical equipment leasing?

How Medical Equipment Leasing Works
Essentially when it comes to leasing it means that you have the right to use and operate the equipment you have without having to shoulder the burden of owning it outright. Some of the many advantages of leasing your equipment include flexible options, lower payments for the assets, and massively reduced costs upfront.

In terms of medical equipment, an industry-standard lease will usually run for between three and five years. Following the completion of the initial leasing period, you will then have the option to either purchase the equipment outright, renew it and seek an upgraded model if available, extend the lease for a longer period of time, or simply just return the equipment to your supplier. As the medical industry operates in such a technologically driven field, medical equipment leasing can often be one of the most financially effective strategies to ensure your facility has cutting-edge equipment without having to tie up a significant portion of your capital.

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On the topic of capital, many organizations will also utilize a leasing structure in order to efficiently manage their cash flow. Lower monthly payments and flexible end of term options can allow you to get the most out of the equipment while still being able to provide a high quality of service to your patients.

What is Equipment Financing?
In contrast, equipment financing refers to the practice of taking out a loan to pay for your medical equipment which will then be paid back over an arranged period of time. By choosing to finance medical equipment, it will eventually lead to you having full ownership of the asset outright. For organizations with strong credit or who regularly utilize assets with a long life expectancy, equipment financing can be an incredibly effective strategy to maximize your return on investment.

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. This means that you will be able to acquire medical assets with little or no immediate cash outlay. Not having to part with this large lump sum payment, you will be able to allocate the capital to other areas of your organization in order to offer the best service possible. Since medical equipment, such as CT Scanners and MRI Machines, can cost several hundred thousand dollars, working closely with trusted financing partners, such as Meridian Leasing, can be the best approach to take.

Comparing Leasing and Financing
Deciding whether it is a better option for you to lease medical equipment or to acquire it through financing practices can be a difficult decision and is dependent on a number of different factors. You will need to weigh the advantages that each route has and which ones will be the most appropriate for your specific facility.

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In regards to leasing, these advantages include:

● Very simple and easy process that is available to any facility
● Allows you to control cash flow effectively
● Lets you adapt quickly as technology and machinery evolves
● Offers greater flexibility than purchasing outright
● Upgrading to improved equipment can help improve overall efficiency

When it comes to financing though, the set of advantages that it provides are:

● No outright, lump-sum payments to acquire equipment
● Capital can be allocated to other areas of your organization for greater improvements
● Following the completion of the loan period, you will have full ownership of the equipment
● Allows you to maximize your return on investment

Final Thoughts

Medical equipment leasing and financing is only set to continue rising in the coming years. Deciding which option is the right one to suit your unique needs is an important decision that you will need to get correct in order to offer your patients great service. If you prioritize flexibility and conserving capital, then leasing is probably the better option. On the other hand, if your end goal is to own the medical equipment outright, then equipment financing would be a more suitable approach to take.

Author Bio:
Mike Myers is the VP of Healthcare at Meridian Leasing, an equipment leasing, and financing company based in Deerfield, IL. With more than 35 years of experience in the healthcare and finance industries, Mike excels at building medical equipment strategies that meet the clinical and financial needs of their clients.

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