Buying physical therapy equipment can be expensive, complex and time consuming. Thus, many medical institutions, rehab centers and individuals have turned to leasing physical therapy equipment.
If you’ve had an eye on some expensive piece of new equipment for your rehab hospital or medical practice, you don’t need to worry about how to afford it. Instead, it is important to be concerned about how you can effectively utilize your financial resources in the long term. The answer to this question will help you decide if taking a bank loan, buying the equipment outright or leasing the equipment would be feasible with your financial plan.
According to industry experts, the key to success is having a handle on the cash flow side of your business and management of daily operations. When it comes to the medical community working with rehab patients who need therapy, these practices become even more important. Most of the practices which help your business flourish consider the financial management side of the business.
For most rehabs and medical facilities requiring physical therapy equipment, it has become important to develop healthy relationships with both a leasing company and a bank. You need to keep a check on some alternatives to develop a sound financial plan. It will also help you decide how to finance the equipment to get an overview of the entire financial picture.
With the ease of leasing physical therapy equipment, you can’t overlook the importance of this perfect alternative. However, it’s also important to be clear about the scenario of buying the equipment outright.
Should You Buy the Equipment?
For many years, this was considered to be the most common and profitable option. Rehab centers and medical facilities saved money and bought the equipment outright. When you buy some equipment with private reserves, it allows you to skip paperwork, applications and other formalities.
However, if you take a loan from the bank, you may have to pay the interest rate. This could increase the overall cost of the equipment. In recent years, the ease of leasing physical therapy equipment made the medical community realize why leasing was a much better alternative.
More Convenience with Leasing the Equipment
For most rehab professional and medical facilities, leasing physical therapy equipment has become the most revenue enhancing and viable way to acquire the new equipment. One of the major benefits of leasing equipment is more flexibility. Typically, the leasing arrangement would last from 1-5 years. Most companies tailor the arrangements according to your immediate and long term financial needs.
When it comes to leasing physical therapy equipment, there are two broad categories:
● The Dollar Purchase option
● The Fair Market Value lease
The Dollar Purchase option requires you to make agreed-upon payments, and allows you to buy the equipment outright for just $1 when your lease ends. For tax purposes, this option is entered onto the account books as a capital expense. It can be depreciated over years.
The Fair Market Value lease requires you to make regular payments, and return the item. If you want to purchase the item, you have to pay a buyout fee. This may be around 10% of the actual purchase price. Since there’s a buyout price, you can write off monthly payments in the account books. These expenses can be considered as business operating expenses.
If you think you won’t have to keep the equipment at the end of your lease, the Fair Market Value lease will be a perfect choice. You can make monthly payments, write them off in your books, and when the lease ends, start a new one for an entirely new and advanced piece of equipment. However, if you plan to stick with the equipment, the Dollar Purchase option will be perfect.
Versatile Leasing Arrangements
You can also choose from many other arrangements. If you’re a small practitioner who’s just started out, you can enter a graduated fee arrangement. It allows you to start with some modest payments, and proceed to larger payments later.
Another arrangement is the short term deferred payments. It allows clinicians to skip some payments for 90 days or longer. It gives them a chance to use the particular equipment, and build up a client base.
In addition to this, many leasing arrangements can be considered as bundled expenses. This is usually not provided by traditional bank loans. With bundling, the terms of your lease will include the cost of the equipment, and soft costs like installation, training and shipping. Moreover, you don’t need to make any down payment, and the processing time is very quick and easy.
For more information on leasing physical therapy equipment, simply CLICK HERE.