| Financing Medical Equipment (loans)
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Financing Medical Equipment
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Financing Medical Equipment
What Are the Range of Options for Equipment Acquisition?
Cash Payments
This option assumes that there is enough cash available. Advantages: - It's simple and quick. - Everybody accepts cash - Cash purchases minimize paperwork and middlemen and may help reduce purchase price.
Disadvantages - It's generally not a good use of funds.
In today's investment market, you can often obtain a yield on your money in excess of the interest charged for financing the equipment purchase. The only rationale for paying cash for the purchase is if your funds are in a low-paying account (e.g., a passbook savings account yielding 3%) whose yield is less than the interest on a loan or lease. In that case, taking the funds from a low-yield account and losing the 3% interest in order to avoid paying 9% or 10% is a sound financial decision. Of course, having significant funds in a 3% account is not wise cash management.
Financed Purchase In this method of purchase, a lender provides funds for the purchase and generally obtains some form of lien or other encumbrance on the equipment until the funds have been repaid.
Advantages
- It does not deplete cash flow. (Usually a 10% to 20% down payment of the total purchase price is required. (In many cases, the income generated by the equipment can exceed the payments.)
- Funds not expended for a cash purchase can possibly earn a higher-income yield than the interest rate of the loan. Disadvantages
- Interest rates may be high.
- The down payment may be high.
- The equipment is encumbered by a third party (unless the funds are borrowed from a source other than a financial institution for instance, from your pension fund).
Lease A lease offers an alternative to traditional financing. With a lease, the equipment is owned by the leasing company. The practice makes payments to the leasing company in exchange for being able to use the equipment (i.e., essentially rental payments). Leases can be closed-ended, in which case the leasing entity retains the equipment at the end of the lease term. There are also open-ended leases, where at the end of the lease term a predetermined amount is paid to the leasing entity, and the practice attains ownership of the equipment.
As a general rule, the higher the residual value (balance owed) at the end of the lease, the lower the monthly payments.
Advantages - Generally little or no down payment is required. - Leases are often supported by the equipment manufacturer, which can lower the interest rate or the residual payment (the amount required to attain ownership of the equipment at the end of the lease term). - Leasing can give you the ability to obtain more purchasing power from a given amount of available cash. - Sometimes equipment becomes obsolete in a relatively brief period of time. A closed-ended lease may allow you to use the equipment during its useful life and return it to the leasing entity at the end of the lease term with a lower total expenditure than an outright purchase would have required.
Disadvantage - More interest is paid than in any other form of acquisition.
Other Leasing Considerations
1. Trade up - An equipment manufacturer may have a lease or purchase program that will allow significant credit for the equipment you've acquired from them when you move up to a more current model or to newer technology. This can alter the calculation of the best option for acquisition.
2. Supported Leases or Financing - An equipment manufacturer may support the interest rate of a lease or financing plan and may lower lease payments by increasing the residual value of a closed-ended lease. Again, these special offers may significantly alter the assessment of the best acquisition option.
3. Purchase Price - No matter what financing option you choose, do not ignore the purchase price. Negotiate your best price before you evaluate financing. Do not fall into the trap that automobile dealers have used for years: "You can have the latest and best visual fields machine for only $49.95 a month!" You should always start with the purchase price and then move to the terms (whether lease or purchase).
4. Beware of the Lease That's Not a Lease - The Internal Revenue Service may consider an open-ended lease with a purchase option to be a purchase contract rather than a lease. The impact of this is that the lease payments may not be deducted as expenses, and instead the equipment will be capitalized and depreciated. Have your professional financial advisors evaluate the financing contract to assess your level of risk.
5. Each Transaction Is Unique - Each piece of equipment you are considering for acquisition must be evaluated in the context of the following:
a. Purchase price
b. Projected useful life of the item
c Your current cash position and monthly cash flow
d. Your current and projected future tax position
e. Financing incentives offered by the vendor
f. Careful evaluation of the lease or financing contract to ensure that it meets the requirements for the method you plan to use to report the equipment in your tax filings
g. Any other considerations required by your expert financial and tax advisors
In today's financial and tax environment, many of the factors that favored one type of financing over another have disappeared. What remain are the purchase price and financing terms, whether the transaction is called a lease or a purchase. Keep in mind that today's market is not as good as it was last year. In the final analysis you may find that purchasing is cheaper than the interest cost on a lease.
For equipment that you anticipate retaining at the end of the lease or financing term, the purchase price, down payment, monthly payments, and total payments (principal and interest) are key. These factors can be impacted by incentives from the vendor, but ultimately the same evaluation needs to be done (purchase price, down payment, monthly payments, and total payments). Secondary issues may include tax advantages and other concurrent acquisitions.
If you think that eventually you may be recycling the equipment or trading up to more current or more capable models the evaluation changes; and a lease, especially one that is artificially supported by the vendor, may be a better way to go.
Finally, if you are just starting out in a new practice or have just acquired an existing practice and need to upgrade equipment, current cash availability and projected cash flow may dictate that you finance the acquisition with the lowest possible cash outlay, even if the ultimate total of funds required is significantly higher. Remember to get advice from a professional to help you sort out the details of the equipment lease.
Kent Harlan, a CPA since 1984, has served as Financial Advisor and Consultant to several companies and author of numerous articles in the alternative finance arena. He is the owner of Ozarks Capital Funding, LLC, a company that focuses on providing a number of financial services, including factoring, equipment leasing, and healthcare financing. Website: www.ocflink.com email: kenth@ocflink.com
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Need Cash Loan in Cash Emergency
Cash loans are the best source of finance to meet immediate and short term expenses. Commonly it is seen that sometimes an individual earning a limited income finds difficulty in supporting some personal or sudden expenses. In such situation, he basically looks for the source in which an amount gets faster approval and doesn't involve much paper work. One of such source is cash loans.
Credit score in cash loans doesn't matter that is either an individual is bad credit scorer or good credit scorer, they can avail cash loans. It is also true that cash loans carries high rate of interest but it doesn't put much burden on an individual as they are short term in nature and they have to be repaid within short span of time. It also helps an individual to repair his credit score by making duly and timely payments.
In cash loans an individual is not required to place collateral against the loan amount rather he is asked to give post dated cheques which acts as security against the cash loan amount. And, when the due date arises, the lender encashes the cheque provided by the borrower.
The amount borrowed in cash loans is much smaller than in any other long term loans. Amount generally varies from £200 to £1500. And they are generally repaid on the payday of an individual or as per the term decided between them.
Every individual looks for competitive rate of the cash loans, but the question arises that where to look for competitive rates? Today most of the banks, financial companies and small lenders provide cash loans on low rates as this is the most common loan in the financial market. But, before accepting any offer, there is always a need to compare it with other offer of cash loans being made. And, only that offer must be accepted which involve minimal cost.
Cash loans is also known by different names such as payday loans, instant cash loans, personal cash loans, etc.
Cash loans are also available through online in other words, an individual can apply as per his convenience either from his office or at home. Basically, two things are needed for applying through online that are, computer and internet accessing to it.
To wrap up, it is absolutely right to say that cash loan provides an instant financial support when cash emergency arises despite of bad credit score.
Daniel Robinson has done his masters in finance from Georgetown University. He is engaged in providing free, professional, and independent advice to the people needing loans. He works for the ModernCashAdvance. To find Cash loans,fast cash loans,payday cash loan,quick cash loans,cash advance payday loan visit www.moderncashadvance.com
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