Medical Equipment Acquisition And Leasing
Keywords: leasing medical equipment, medical equipment financing, medical equipment leasing company, healthcare
There are a wide range of options that healthcare providers can utilize to acquire much-needed equipment. This article summarizes these choices and offers advantages and disadvantages to each option.
Options for equipment acquisition:
1. Cash Payments
This option assumes that there is enough cash available.
Advantages:
* It’s simple and quick.
* Everybody accepts cash
* Cash purchases minimizes paperwork and may help reduce purchase price.
Disadvantages
* It’s generally not a good use of funds because it ties up much needed capital that can be utilized in other profitable ways.
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 whose yield is less than the interest on a loan or lease. In that case, taking the funds from a low-yield account 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.
2. 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 such as a pension fund.
3. Leasing
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. This arrangement could result in lower total expenditures than an outright purchase would have required.
Disadvantage
* In general, more interest is paid than in any other form of acquisition.
Other Leasing Considerations
1. Trade: An equipment manufacturer may have a lease program that makes it easy for the lessee to upgrade. The program can make sense for the lessee if the lessor grants significant credit for the older equipment. 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. They 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 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. instead, the equipment will be capitalized and depreciated. Have your professional financial advisor 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
Discussion
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 may not be as good as it was in the past. 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, you must evaluate several factors. The purchase price, down payment, monthly payments, and total payments are key. These factors can be impacted by incentives from the vendor, but ultimately the same evaluation needs to be done
If you are just starting out, your current cash position may dictate that you finance the equipment. Remember to get advice from a professional lease broker to help you sort out the details of the equipment lease.
Kent Harlan has been a CPA since 1984 and is the owner of Ozarks Capital Funding, a Missouri-based company offering financing in the areas of accounts receivable factoring, equipment leasing, asset based lending, and financing for healthcare providers.
ocflink.com
Previous Articles Highlighter:
Financial Security In An Unstable Economy (1)
At the top of the list of bills to be paid, put your own name. Pay yourself first. Nobody can help you, but you. 4. Make a List of Necessities: Make a list of the necessities that you need to live: rent, mortgage, clothes, food, etc.
The Second Mortgage Home Equity Loan (2)
There are a couple of things that anyone getting a home equity second mortgage should be aware of. A second mortgage puts a second charge on your home, meaning that the second mortgage provider can take a share of any proceeds if your home has to be sold.
What Are The Current Tax Rules You Must Consider For Your Estate Planning? (3)
In this example, it would amount to $450,000. This is a huge amount that can be saved by proper estate planning. It can be passed on to loved ones or serve to support a charitable purpose of one's choice by forming a trust.
Tips To Curtail Your Estate Taxes (4)
On the death of the surviving spouse, the entire estate is taxed, allowing an exemption of just the $2million attributable to the last dying spouse. With due planning, one can form a family trust which will allow availing the benefit of the $2 million exemption available to the spouse who died first giving a total exemption of $4 million.
How Can Gifts Help You Reduce Your Estate Taxes? (5)
If married, the amount doubles as your spouse is entitled to make a non-taxable gift of a similar amount. This amounts to $24000 a year to a married couple.
A Tax Guide To Manage Your Estate Taxes Effectively (6)
Estate tax is proposed to be totally abolished from 2010. However, it is a sunset provision and needs legislative confirmation in 2011 otherwise the tax returns. As you can never be sure of political promises in view of perpetual economic and political changes, it is advisable to take proper steps to reduce the size of your taxable estate now.
Taxes You Must Consider Before Passing On Your Properties To Your Heirs (7)
If you wish that your property should pass on to your heirs only after your death, you must take estate tax into account. Under US laws, an individual can gift property worth one million dollars in his/her lifetime without attracting any gift tax.
Monaco Real Estate Prices To Overtake London Again? (8)
Monaco property specialists believe that most new apartments will be sold to investors off plan well in advance of any building work starting. 'The problem with property in Monaco is not the lack of buyers', they say, 'but more the lack of good properties for buyers to choose from.
Tax Haven Property 2007 Gets An Icy Chill (9)
A notarised copy of the applicants passport, birth certificate and a certificate of good conduct from the home country are submitted at the same time. According to a local travel guide residency normally takes between three and six months to be approved.
Andorra Property Prices Hit 2007 Ice (10)
Recent improvements in the road from Barcelona to Andorra though have cut the travelling time by some thirty minutes to two hours fifteen minutes. 'Given the tax advantages Andorra has', note the Andorra guide, 'A two and a quarter hour trip to the nearest international airport could be viewed as a small price to pay for those who will be saving substantial amounts of money in tax.
Andorra Tax Haven Introduces Capital Gains Tax (11)
One of the drawbacks for those looking to become a resident in a tax haven when considering Andorra has been that the country has no airport of its own, and is unlikely to have ine future given that it is located in the Pyrenees.
Asset Based Lending As A Financial Tool (12)
Asset based lending tends to be more expensive than other types of financing, often three to five percentage points above traditional bank financing. ABL runs counter to the thinking of a lot of CFOs who believe it is dangerous to tie short term assets to long term financing.
What Are The Benefits In Obtaining Debt Consolidation Services? (13)
A debt consolidation company must always be ready to attend to your concerns. Truly, obtaining debt consolidation services will help you regain a good credit score. But remember, cooperation is needed on your part.
Forex Broker - Choosing The Right Forex Broker (14)
They also require much higher startup costs, sometimes $50,000 or more! The potential to make a lot of money is certainly higher with this particular account, but so are the losses, so leave it to the experts, unless you are one yourself!
The Foreign Exchange Market (FOREX) Uncovered (15)
Those that do know what Forex trading is have come to love the excitement that trading can bring. Many of these individuals go on to devote their whole lives to the art of trading.
Run The Numbers Before Buying An Investment Property (16)
The safest approach is to look at the tax rate and the purchase price to determine your future taxes. VACANCY COST For some reason people tend to forget to take into account vacancy rate.
How School Loan Consolidation Can Save You Money (17)
You will also lose the opportunity to consolidate your loan, since only federal loans are consolidated. If you go the federal loan route, then you can look into Stafford loans, Perkins loans, or other federal consolidation programs offered by some of the larger national lenders.
Saving Money Through Student Loan Consolidation (18)
Many people choose this time to consolidate student loans because the interest rate is usually lower during this grace period. By consolidation, you will lump all of your loan payments together, giving you one loan payment to make to one lender.
Discover Newly Launched Hedge Funds And Those Who Gained On Exit (19)
The Amanda Capital Group is a private equity investment company. Its parent company (Amanda Capital PLC) is the first publicly listed private equity hedge fund of funds in Scandinavia.
Selling Your Own Home (20)
If you're not up to painting your entire house, at least paint the areas that make the biggest impression, such as the entry/foyer, living room, dining room, kitchen and master bedroom.
Newer Articles Highlighter:
The Many Faces Of Student Loans (1)
Keywords: student loans, student loan consolidation, saving money through student loan consolidation There are a number of different types of student loans. They are all created to help students and parents discover the right choice for their respective situation.
Are Balance Transfer Credit Cards On The Way Out? (2)
Jon Francis has been involved with finance for many years! With an in-depth knowledge of the credit card UK market and helps others get the best from a credit card.
A Simple Way To Cut Your Monthly Expenses (3)
Move your cable or satellite service to a lower subscription rate. Or, better yet, try going without it for a while. Yes, you can live without TV ...
Why Is Estate Tax Planning So Important? (4)
Form a revocable living trust:- A revocable living trust will enable you to appoint a trustee who can succeed you in order to manage the trust when you cannot do this due to injury or illness/death and avoid any probate court guardianship issues.
Using An 80 20 Mortgage To Avoid Mortgage Insurance (5)
This can be a good option if you have some money for a down payment but not enough to cover the entire 20%. The second mortgage can either be a fixed second mortgage or it can be a line of credit.
Parents Face 'Mounting Costs On Nurseries' (6)
Abbi Rouse is the Editor in Chief for Essentially Home Loans where visitors can apply for cheap loans online. We also specialise in debt consolidation loans, and secured loans.
Garbage In, Garbage Out (7)
It's ironic that in this age where we have more information than we can handle, many people have forgotten how to think. Maybe that's why my 87 year old granduncle gave up on the internet, and has gone back to reading books!
Should You Buy A Foreclosure Home ? (8)
One of the most popular ways that buyers do this is to buy a foreclosure home. There are two types of foreclosures that you can buy and you can save a lot of money with each type.
How To Manage Your Debt Consolidation Solution (9)
When that $400 a month, which for the majority, is much more, becomes the total you can pay each month, you have reached a point where you will in no way pay off the debt.
Buying Insurance For Your House (10)
Get at least 4 free quotes to compare and be sure to compare pricing and coverage with your current homeowner's policy to see if you can save some money for the same amount of coverage.
How To Find A Forex Broker That Won`t Rob You Blind (11)
You should also watch to see if a brokerage firm has strict margin rules. Since you are trading with borrowed money, your forex broker has a say in how much risk you are able to take.
Options: How A Million Dollar Options Trader Sets His Stops: Underhanded Tips And Tricks (12)
If you do, you`ll be taken out by the position`s normal volatility. If the position is choppy and too risky to trade without tight stops, maybe you`d better look for a better position to trade.
24 Hour Profits By Picking The Perfect Investment Club Broker - Hidden Tricks Only The Experts Know (13)
Most of these inexpensive brokers charge anywhere from $4 to $12 per trade. + Moderately priced. The mid range price that these brokers charge is anywhere from $12 to $20 per trade.
The Benefits Of Having A Business Credit Card (14)
Having a credit card for your business allows it to build up a score. A business credit card greatly simplifies how you spend for your business. You won't have to rely on writing out checks in advance for everything, and you can authorize trusted employees to make necessary purchases on the business credit card.
Stocks: Hidden Blueprint For Profiting In Stock Trades - Entering, Holding And Exiting - Part 2 (15)
Morning gaps down present good opportunities to buy stocks you want. Buying a gap down is an excellent way to enter a position, since when a stock gaps down, it often opens near what will turn out to be the low of the day.
The Secret Formula To Picking A Million Dollar Forex Trading Strategies (16)
Keywords: forex trading strategies All successful traders have forex trading strategies that they follow to make profitable trades. These forex trading strategies are generally based on a strategy that allows them to find good trades.
Tips And Tricks To Set Up Your Second Stock Trader Club Meeting - Part 2 (17)
The stock trader club should also start to consider its educational program. If you have elected an Education Officer, they can take the lead here. If not, the Vice President should get things rolling.
Unbreakable Forex Trading Rules Guaranteed To Increase Profits (18)
Keywords: forex trading rules There are a few important forex trading rules in trading that should never be broken. If you apply these rules consistently, and with discipline, you will become a profitable trader.
Forex Investing At The Right Time And The 10 AM Rule And How It Works (19)
rule is a great example of this concept, and is an example that protects your capital. Let`s say you want to buy a forex stock, for whatever reason; a trend play, or a market rally that you think a currently hot sector will participate in.
Commodities: Discover The Amazing Award Winning, Secret To Support And Resistance Lines (20)
The key to setting stops that work is to use the support levels that exist for a commodity. The same principle applies for a stop buy-to-cover on a short position: Set your stop above, not at or below, resistance.