Obtaining financing for dental equipment can be a daunting task. Do you purchase the equipment with cash, finance, or lease it? Choosing the right financing company is only a portion of the equation. Servicing agreements, the lifespan of the equipment, and financing terms are all factors that you must consider. As you already know, purchasing dental equipment has large upfront costs. The questions to ask are, how long will you be using the equipment and what is the longevity of the equipment?
Ever thought about leasing? With leasing, you can spread payment out for the entire lease term. This will increase cash flow since you are not putting all your eggs in one basket. This precious cash flow can then be used for other office expenses such as seasonal employees or holiday parties. Another advantage to leasing is the tax advantages. For some types of leases, the IRS does not consider them as purchases. Instead, they are viewed in the eyes of the IRS as tax-deductible expenses. As a tax-deductible expense, a practice can deduct payments on the lease from income, which in turn will reduce the cost of the lease. However, if you purchase equipment with cash, you will ultimately save since you are not paying any interest. As always, consult with your CPA or a tax professional for guidance.
Existing Financial Institution
Another way to finance your dental equipment is to go to your existing financial institution. Depending on where you bank, your financial institution may have programs that cater to dentists. Even if you just started your practice, your financial institution may be able to give you great rates and payment options. These programs may have financing options that you cannot get at any other institutions or even the manufacturer. Your financial institution will take into account your relationship history with them as well as your balances, products, and services for the best pricing. However, some institutions do not offer such programs, and you will have to shop around for the best deals.
Financing from the Manufacturer
Most of the time, the best financing terms will come straight from the manufacturer. The manufacturer typically has programs that cater specifically to the dental field. They take into account the type of dental equipment, credit score, and affordable monthly payments. They may be able to work around any cash flow issues. Keep in mind, with new equipment the rate will be lower than with used equipment due to age and depreciation.
Repair and maintenance are covered under warranty for the first two to three years on most medical equipment. However, after the first few years is when most equipment will start to break down. You may be able to purchase an extended warranty plan but it will be much more expensive. All equipment have a lifespan. Just like a car, it costs money to extend the life of a piece of equipment. Another factor to consider is if employees mishandle or damage the equipment. Ultimately, the company will eat those costs.
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