New equipment can make a big difference in your medical or dental practice. Whether updating older machines or investing in new technology, equipment can be costly.
So how should you pay for your next equipment purchase? There are four main options: cash, equipment loans, leasing or seller-preferred financing. Here’s what you need to know.
Buying dental or medical equipment with cash may be the most convenient and direct method of financing your purchase, but it's not always the best choice. Even if you have the money, using up a large portion of your practice’s savings all at once might not be smart. It's better to keep some money in your practice’s savings in case something unexpected happens and you need the extra funds.
Owning your own equipment can give your company valuable tax breaks, lower overhead costs, and boost profitability. Using an equipment loan allows you to write off the cost of financing (interest expense) and the loss of value over time (depreciation).
This financing option entails borrowing a specific amount to buy the equipment, with fixed interest rates and a set repayment schedule. Equipment loans are secured by the equipment itself, which gives lenders a sense of security and frequently results in more favorable terms.
Equipment loans are beneficial for practices that want to spread the cost of new equipment over time and eventually own it outright. This type of loan allows practitioners to maintain control over their assets and is particularly advantageous for those who have the financial capacity to handle monthly loan payments.
In addition to spreading the cost of equipment over time, financing can also help you reduce your tax liability through depreciation. Depreciation is one of the biggest tax benefits of running a practice, and it can result in a tax deduction on qualifying equipment and software for up to $1,080,000. This can help you lower your taxable income and increase cash flow.
If you are considering financing equipment for your practice, be sure to talk to your accountant or financial advisor to learn more about the tax benefits and how they can work for you.
Leasing medical or dental equipment is a popular choice for practices looking to preserve capital and maintain financial flexibility. However, the tax benefits are not as advantageous as purchasing with an equipment loan or cash.
With a lease, you rent the equipment for a predetermined period and make regular lease payments. You are not able to write off the depreciation, which is a tax benefit of purchasing equipment. Lease interest rates are often higher than loan interest rates, and lease terms typically include prepayment penalties.
Leasing provides the benefit of avoiding a large upfront cost, making it a suitable choice for practices with financial limitations. In addition, at the conclusion of the lease term, there may be the option to buy the equipment at a discounted price. This flexibility enables doctors to remain up-to-date on the latest technological advancements without having to make a substantial upfront investment.
Several suppliers provide financing options that may be more attractive than those from third party lending. While these suppliers offer excellent terms, they are only beneficial if you can pay off the balance during the promotional period. If you cannot, the interest rate will increase significantly once the promotional period ends.
Supplier-preferred financing may include 0% interest for six to twelve months and a period of no payments. Just as 0% auto financing from Chevrolet and Ford motivates car buyers, equipment manufacturers use extremely low financing options to encourage doctors to purchase their products, but the low interest can be deceiving and lead to trouble if you aren’t able to pay it off during the promotional period.
Before deciding how to finance your equipment purchase, be sure you understand your budget and how quickly you can pay it off.
According to the Equipment Leasing & Finance Foundation, 79.3% of businesses that acquired equipment or software in 2021 used at least one form of financing (lease, secured loan, or line of credit).
There is no one-size-fits-all financing option. The right choice for your practice depends on your needs and the equipment you are looking to purchase.
For equipment that may quickly become outdated, leasing offers a lesser commitment and the opportunity to upgrade items more easily. If you need equipment that will last a decade or more, buying with an equipment loan may be a better option and will increase the value of your business assets.
When looking for the right equipment loan, your approval, interest rates and terms will depend on the equipment you’re buying, the practice’s financial statements, your credit score and the lender you choose.
As you select a lender, we recommend not choosing based only on interest rate but also how their support and services will allow you to focus on what you do best — care for your patients. Find more tips for finding a practice lender.
Panacea Financial, an UptimeHealth partner, offers a variety of practice loans built specifically for doctors. Their equipment loan offers up to $250,000 with competitive rates, up to 10 year terms, and approval in as little as 1 hour.
Founded by doctors, Panacea strives to offer the best products and services to support the doctor community. Start, build, and grow your practice with specialized credit structures, competitive pricing, and experienced advice from Panacea Financial. Start your application.
Panacea Financial is a division of Primis. Member FDIC.
By Michael Jerkins, MD, M.Ed, President and Co-Founder of Panacea Financial
About Michael Jerkins, MD M.Ed
Michael is the President and Co-founder of Panacea Financial and is also a practicing physician in Little Rock, AR. After earning his BBA in Economics he deferred his medical school acceptance to teach middle school science in the Phoenix, AZ area while also earning his Masters in Education from Arizona State University. He then completed medical school at the University of Tennessee Health Science Center before finishing his residency at University of Cincinnati Medical Center and Cincinnati Children’s Hospital. With a faculty position and board certifications in both Internal Medicine and Pediatrics, Michael is able to treat patients of all ages and teach medical trainees in both inpatient and outpatient settings.
About Panacea Financial
Panacea Financial, a division of Primis (NASDAQ: FRST), is a nationwide financial services company offering products in all 50 states as well as Washington, D.C. and Puerto Rico. Panacea offers a full suite of banking solutions specifically built for doctors, by doctors. Learn more about Panacea Financial at www.panaceafinancial.com.