Equipment remains one of the major costs of the healthcare industry, with expenditure on medical goods, including medical equipment, at £39.6 billion in 2021, representing 14.1% of the overall healthcare spending.
In this article, we cover the types of medical equipment financing, benefits and eligibility requirements. We’ll also take a look at the leading providers in the industry and alternative forms of financing.
What is medical equipment finance?
Medical equipment finance is a form of asset finance or equipment finance that enables healthcare providers to lease, rent, or purchase medical equipment through tailored payment plans.
Rather than making large upfront purchases, healthcare businesses can finance medical office equipment, diagnostic tools, IT systems, and even furniture. By spreading out the cost, providers protect their cash flow and can maintain access to the latest technology to provide the highest standard of care possible.
Benefits of medical equipment finance
Given how essential the right tools are for healthcare, medical equipment financing is a common tool for a variety of healthcare businesses, including GP practices, dental offices, veterinary clinics, and home healthcare providers.
1. Manageable payments and improved cash flow
- Financing enables you to spread payments over months or years, ensuring that significant expenses don’t disrupt cash flow.
- Payment plans, such as seasonal or quarterly payments, can be aligned with practice revenue patterns, reducing financial strain.
2. Access to the latest technology
- Medical fields evolve rapidly, and equipment needs regular updating. Financing allows you to replace or upgrade outdated technology, keeping your practice competitive.
- Many finance providers offer easy upgrade paths, so you can access advanced tools as soon as they become available.
3. Ownership flexibility
- Financing offers multiple paths to ownership, such as leases with purchase options or full financing loans.
- Leases may also give you the option to return or replace equipment, reducing the burden of ownership and maintenance on your practice.
4. Tax efficiency
- With medical equipment leasing, monthly payments may be fully deductible as an operating expense, potentially reducing tax liability.
- Loans for medical equipment finance may also allow interest expense deductions, providing financial benefits.
5. Preservation of working capital
- Financing allows you to retain capital for other critical expenses, such as staffing, marketing, or emergency costs.
- Instead of locking cash into equipment purchases, financing keeps your practice agile and financially flexible.
Types of medical equipment finance
Different financing options cater to various needs, from short-term usage to long-term ownership. Here are the primary types of medical equipment finance available:
Medical equipment loans
A medical equipment loan allows you to purchase equipment and repay it over an agreed term. Once the loan is fully repaid, you own the equipment outright. This option is ideal if you want to build equity in the asset over time.
What to know:
- Ownership: Ownership is transferred after the final payment.
- Cost: Monthly payments are fixed, but interest and fees apply.
- Best for: Practices that prefer full ownership of long-term assets.
Finance lease
A finance lease is similar to a loan, but with leasing benefits. You pay to use the equipment for a set period, after which you can either return the equipment, purchase it at a reduced rate, or renew the lease. Leasing is particularly useful for high-cost or rapidly evolving technology.
Key points:
- Ownership flexibility: Option to buy or return at the end of the lease term.
- Payment structure: Regular payments, often lower than loan payments.
- Best for: Practices that want flexibility to upgrade equipment regularly.
Operating Lease
An operating lease allows you to rent equipment without owning it, returning it at the end of the lease term. It’s useful for equipment with a short lifespan or when you need temporary access to advanced technology.
Key points:
- Lower payments: Typically lower than finance leases due to ownership remaining with the lender.
- End of term: Equipment is returned, with options for renewal.
- Best for: Short-term needs or fast-evolving technology.
Hire Purchase
Hire purchase involves regular payments to “hire” the equipment, with ownership transferring after the final instalment. This option is suitable for high-value, long-term assets, as it allows practices to spread the cost of ownership.
Key Points:
- Ownership transfer: Ownership passes once all payments are completed.
- Upfront cost: May require a down payment.
- Best for: Long-term equipment where ownership is preferred.
Eligibility criteria and required documentation
Financing requirements vary among providers, but common eligibility criteria include:
- Trading history: Most lenders require at least 2-3 years in business.
- Minimum turnover: Some lenders set a minimum annual turnover threshold, often around £1 million for high-value assets.
- Creditworthiness: A strong business credit score can result in more favourable terms.
Documentation required
- Financial statements: Annual financials or recent profit and loss statements.
- Bank statements: Several months’ bank records to demonstrate cash flow.
- Equipment details: Quotes, invoices, or cost estimates for the specific equipment.
Leading medical equipment finance companies
When choosing a medical equipment finance provider, consider industry expertise, fee structures, and processing times. Here are some popular options:
- BNP Paribas Leasing Solutions: Provides tailored healthcare financing, including flexible leasing for healthcare providers and suppliers.
- Siemens Financial Services: Specialises in financing for medical equipment and healthcare technology, with options for private practices and NHS partners.
- DLL Group: Offers payment flexibility and innovative solutions, including usage-based plans and upgrade paths.
- Mitsubishi HC Capital: Ideal for high-value purchases with finance leases and hire purchase options, supporting large transactions with a rapid approval process.
Alternatives to medical equipment finance
Medical equipment finance empowers healthcare providers to invest in essential equipment without compromising their financial stability. However, while medical equipment finance can help you get the assets you need while spreading the cost, healthcare involves a range of other financial pressures.
If you’re looking for financial support that can adapt to your needs, whether it’s equipment, staffing or premises, you could consider a Flexi-Loan from iwoca.
- Flexible funding, there when you need it: We’ll approve your business for a credit limit – you can draw down as needed and only pay interest on what you use.
- Repay on your terms: Our loans are designed for flexible repayments, so you stay in control – overpay or repay early with no fees.
- Quick, straightforward application: Apply in minutes and get approved in as little as 24 hours.
To find out how much you could borrow and learn more about our small business loans, why not check out our business loans calculator?
Medical equipment finance FAQs
What types of medical equipment can be financed?
Medical equipment finance covers a wide range of tools, including diagnostic machines (MRI, CT), surgical instruments, medical office equipment, IT infrastructure, and even security and storage systems.
What is the difference between a medical equipment loan and a lease?
A loan results in full ownership after repayment, while a lease allows for flexible end-of-term options, such as returning, upgrading, or purchasing the equipment.
Can I get 100% financing for medical equipment?
Yes, many lenders offer up to 100% financing, meaning you can cover the full cost without a down payment. However, terms may vary based on your credit profile and business financials.
What are the typical fees and charges for medical equipment finance?
Fees can vary depending on the lender and finance structure. Common fees include interest on loans, setup or origination fees, and maintenance fees for certain leases. It’s essential to review fee transparency when selecting a finance provider.
How quickly can I access financing?
Many finance providers offer quick approvals, though traditional banks may take longer due to more extensive documentation and credit assessments.
