Equipment vendors who offer a properly structured leasing program are not only giving the customer a viable financing option, they are taking a major step to increase sales, market share, and profits. Yet it’s surprising how many companies will not provide a leasing program. Some say it’s because their customers have their own sources. Others say their customers pay cash. This mindset can be costly in a variety of ways. The biggest problem is that it can drive the customer to the arms of your competition.

Some equipment suppliers do offer a leasing program, but give the customer a choice between several leasing companies for them to use. That may sound practical, but “shopping” deals with a multitude of leasing companies can actually lower the chance of approval. If the customer chooses one of the leasing companies, and is subsequently declined, two negative actions may result. First, the credit inquiry lowers the customer’s credit score. Second, it will be clear this is a shopped transaction, and will make it more difficult to get the credit approved. If it is approved, the lower credit score will cause the rate to be higher.

Establishing a sound relationship with one reputable leasing company is the best course of action for both your company and your customers for several reasons:

• The relationship (allowing one leasing company to be involved) should result in lower rates for your customers, thereby making it more attractive to buy from you. If a vendor uses multiple companies and shops deals, they will not usually get the best rates.
• Using one leasing company results in better pricing because of increased volume. Leasing companies make more money when deals come through referrals, rather than expensive marketing. The referral business is more profitable because it provides a steady stream of deals from clients who are looking to acquire equipment now and need financing.
• Because maintaining the relationship with the equipment supplier is critical to profitability, they will do everything in their power to keep the approval rate high and the lease rates low. These savings are passed on to the client.
• The leasing company will also be more motivated and go the extra mile to fund the most challenging credits.
• Because of economies of scale involved with large volume directed to the leasing company, the supplier is often entitled to referral fees of 1% to 2%, thus providing an additional income stream.

Medical equipment leasing is an excellent way for providers to allow their practices to acquire state of the art equipment. The medical profession is constantly changing, so in order to remain competitive, providers must continually upgrade their equipment packages. Unfortunately, to outright buy or get a standard loan on the equipment requires a huge outlay of cash. Leasing solves the problem because no down payment is required, thereby allowing the provider to retain thousands (or hundreds of thousands) of dollars of capital. Lease periods typically range from 24 to 60 months, so there is a great deal of flexibility to upgrade the equipment without a major capital investment.

There are many advantages to leasing medical equipment. There are no down payments, the application is relatively simple, and no restrictive borrowing covenants. In addition, leasing doesn’t involve cross collateralization. Leases provide 100% financing with low rates for those with good credit. Other advantages include tax deductions and immediate write offs (depending on how the lease is structured), improved cash flow, fast processing, and better asset management. You usually get an option to buy the equipment at the end of the lease term at a stated amount or fair market value. Leases can also be written to accept lower payments during low volume cycles and can also provide an option for the lessee to make lower payments during the initial years and accelerate payments in the latter years.

Most any piece of medical equipment can be leased, such as x-ray machines, CAT scan machines, physical therapy equipment, computers, examination tables, lab equipment, and even waiting room furniture. Because of the many advantages of medical equipment leasing, providers are able to give the highest quality care to the public.

We advise using a financial broker to assist in the leasing process. A broker works to put the package together for the leasing company and helps the client sort through the myriad of options available.