Basics of Leasing Medical Equipment

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					Basics of Leasing Medical Equipment
Leasing equipment is a quick and affordable solution for business owners
who are looking to expand their business without major cash outlay.
Nationwide, approximately 40 percent of equipment is leased and about 80
percent of businesses lease some of their equipment. Medical
professionals often prefer leasing equipment, as the equipment can be
expensive to buy, has a long life, and won't return a profit for years.
Flexibility is one of the key benefits of leases. A lease can be crafted
for almost any situation. For example, if your company is seasonal, some
leasing companies will be able to structure the terms of the lease to
suit your financial pattern. Because of the built-in adaptability of
leasing, there are almost as many kinds of leases as there are customers.
But the process itself is simple, and the following five steps will apply
to most equipment leasing transactions.
1. Determine what equipment you would like to lease
Before you look for a leasing company or start a lease application, you
should know what equipment you would like to lease. You can pretty much
lease any type of equipment that is essential to your business. Leasing
is for businesses, not individuals, so it is important that the purpose
of the equipment is for business use only and not for personal use.
Because medical equipment stays in the office and is used for medical
work, this is usually not an issue.
2. Find a leasing company you want to work with
A good place to begin would be the manufacturers of the equipment you
wish to lease. Many equipment sellers have existing relationships with
leasing companies. You are not bound to these relationships. Most leasing
companies can lease equipment from any equipment seller that can be
proved to be a legitimate equipment seller. Be prepared with a list of
the different types of equipment you want to lease, and how many units of
each type. Don't hesitate to explain your intended use for the equipment,
and how you expect leasing the equipment to help your practice be more
profitable. This will give your equipment seller a clear picture of why
you need a lease which is helpful.
3. Determine how long you want to lease the equipment, and if you want to
purchase it at the end of the lease.
Many leasing companies will offer specialized terms to fit your business
needs but the industry standard is a 2-year, 3-year or 4-year lease, and
the longer the term, the smaller the monthly payment. The term will be
dictated by not only your budget but the type of equipment. For example,
equipment that will be out of date in three years would not have a 4-year
option. The idea is to begin thinking about equipment like you think
about employees. Pay them when they are working to make your company
money. If you have questions about which option to select you can ask
your leasing company for a recommendation.
Be sure to consider specifically how you want to end your lease. There
are three standard end-of-lease purchase options, where you can buy the
equipment for:
- The Fair Market Value of the equipment
- 10% of the price of the equipment
- One dollar
Keep in mind that the end-of-lease option you choose will have bearing on
your monthly payment. For example, if you pay only a dollar for the
equipment at the end of the lease you are going to have a higher monthly
payment then if you pay %10 of the equipment cost at the end of the
lease. This is because the leasing company will have to make all of its
profit darning the course of the lease. Each leasing company will have
its own stipulations, clauses and quirks so be sure to be clear on the
details of your end of lease purchase options.
4. Apply
Lease applications in general require information about your business and
the owners of the company. Be prepared to provide:
o How long you've been in business
o Business bank account # and contact information (Provide banks that
hold the highest balances and for the longest time. Leasing companies
will want to be assured you will be able to comfortably make your monthly
payments.)
o Social Security number and home address of all owners with over 15%
ownership in the practice
o Three trade references from companies that you purchase from regularly
whose bills you pay on time
o Point of contact for your business
Most applications are done online or by fax, and should take 5 minutes or
less to complete. You will be asked to authorize the leasing company to
review the credit of the owners of the company. If the transaction is
valued at more than $100,000, financial statements and tax returns from
the owners may be required, and approvals may take longer than the
typical 48 hours.
5. Finalize your application and begin leasing
There are three types of replies you will get from a leasing company
after you have submitted a lease application:
- Approved: Your next step will be to select the term and end-of-lease
option. In many cases, doctors are considered low risk credit-wise, so
approvals are more common.
- Declined: Next steps will be to try another leasing company or consider
a different financing method. Keep in mind that each application will
probably involve a credit check, which shows up on the owners' credit
reports.
- More Information Required: If a leasing company asks for more
information, they are more than likely interested in you as a customer,
but just need more information to be comfortable loaning you money.
Once you have been approved, and have selected the term and end-of-lease
option for your lease, you will receive the lease documents for your
review and signature. Making sure you understand all the established
terms of your contract, keep in mind that all contracts are negotiable.
Don't hesitate to ask your sales rep if you have any areas that seem
unclear or where you have concerns. It sounds obvious but don't sign a
contract you are uncomfortable with.
Be prepared to submit first and last month's payment along with the
signed documents. Once your payment has been received and processed, the
leasing company will purchase your equipment and commence the lease. Once
your equipment is installed, the leasing company will ensure that
everything is working to your satisfaction usually by calling you to do
what is call a "verbal" where they check that all the equipment they
purchased on your behalf has arrived and works as expected. After that
you have to pay your lease on a monthly basis and mark your calendar for
the end of term so you make sure your leasing company doesn't just keep
charging you. That is it. It is quite simple actually and most businesses
that lease once recognize how good it is for scaling their business and
lease more equipment.
If you have any further questions about leasing, eLease Equipment Leasing
- http://www.elease.com has a number of free and helpful resources
including: FAQ, Leasing 101 and Why Lease. Tom Williams is President of
eLease Equipment Leasing. He has a degree in Economics from Boston
University, has been quoted in the Wall Street Journal, Red Herring and
Business Times, and is a frequent speaker on e-Commerce and Equipment
Leasing on the national circuit. Tom writes regularly on his equipment
leasing blog.

				
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posted:10/11/2010
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