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Equipment Financing Offers Flexible Solutions for the Medical Device Industry

Wed, 07/24/2013 - 2:47pm
William G. Sutton, CAE, President and CEO, Equipment Leasing and Finance Association

Economic times are challenging many businesses today. The current economic environment poses even greater challenges for organizations in the medical device industry because of their equipment intensive operations. The characteristic innovation of these businesses is precisely what the U.S. economy needs to get moving again. It has never been more important for these entrepreneurial businesses to understand their options for financing the equipment needed to innovate and grow their businesses. Acquiring equipment to operate and grow is critical, and for smart healthcare businesses and providers, equipment financing is a key acquisition strategy.

Acquiring equipment through leasing and other financing methods is more flexible and customizable to meet unique business needs than most funding options. This makes medical equipment finance a perfect fit, especially for start-up and small businesses, which may have trouble getting traditional bank loans. With equipment finance, there’s no jumping through the same hoops as with commercial and industrial loans. For example, typically most lenders want to see two years of financials, which startups, by definition, don’t have.

Equipment finance is a $725 billion industry in the United States, and it is easy to find industry participants who customize their service offerings by end user industry, equipment type, ticket size or end user business size. There are equipment finance companies that offer special programs for startups, and companies that specialize in services for small and mid-size businesses. The important thing to remember is that equipment finance companies offer flexible options that help equip all types of businesses for success.

Medical equipment has consistently ranked number one for the past seven years among equipment types that are financed, according to an annual survey that reports industry perceptions of the top 15 equipment markets. This highlights the medical industry’s preference for leased equipment, driven by the pace of technology improvements and the demographics of the baby-boom generation.

The equipment financing industry’s optimism about medical equipment and favorable levels of liquidity in the marketplace make this a particularly good time to finance equipment. There are many funding sources—leasing companies and banks—that are looking to lend because they have the cash available to deploy.

Key Benefits for Unique Business Needs
In addition to current finance market conditions, the many benefits of equipment financing provide any number of reasons why it is an advantageous option for businesses that depend on sophisticated medical devices. The following are among the most compelling benefits:

100 percent financing with no down payment. Unlike with most traditional lenders, it is possible to arrange 100 percent financing of equipment with no down payment. This is a critical benefit since cash flow is often a concern for small and new businesses. Holding on to cash, or working capital, enables it to be used for other areas of the business, such as expansion, improvements, marketing or R&D.

Elimination of risk of ownership. A business just starting out can use equipment financing to help mitigate the uncertainty of investing in a capital asset until it achieves a desired return, increases efficiency, saves costs or meets other business objectives.

Expense planning for cash flow and business cycle fluctuations. Financing equipment helps maintain cash flow and greater certainty in budgeting by setting customized rent payments to match cash flow and even seasonal cash flows.

Meet the business’s equipment needs. Leasing, loans or other financing enables businesses to acquire more and better equipment than they could have without financing. It is more feasible to make monthly payments than to make large cash outlays for equipment up front.

Updated technology/Obsolescence management. To be on the cutting edge and be competitive, businesses need access to new technology. Certain leasing finance programs allow for technology upgrades and/or replacements within the term of the lease contract. Also, since the lessor owns the equipment, it bears the risk of the equipment becoming obsolete.

There are many additional features of using leasing or other financing to acquire equipment that are also highly beneficial. The equipment expertise of equipment finance representatives makes them a valued consultant to end users, providing services that range from setting residual rates through lifecycle asset management solutions. Many financing companies provide asset management services that track the status of equipment, know when to upgrade or update it, and provide services relating to installation, use, maintenance, de-installation and disposal of the equipment. Equipment disposal, particularly of computers and IT equipment, can prevent end users from incurring legal penalties for improperly disposing of such assets, which are often regulated by federal, state and local governments. Equipment management by a third party, such as an equipment financing company, can enhance the ability of a business to focus on its core operations. Equipment financing can even hedge against inflation because instead of paying the total cost of equipment up front or with a large down payment in today’s dollars, the stream of payments delays the outlay of funds.

Preparing with thorough, accurate information will enable businesses to get the medical equipment they need at the best possible terms. To learn more about equipment financing or to find an equipment finance provider for your medical device business, visit www.EquipmentFinanceAdvantage.org. The site also contains informational videos, types of financing, a glossary of terms, a lease vs. loan comparison and questions to ask when financing equipment.

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