New equipment can make a big difference in your medical or dental practice. Whether updating older machines or investing in new technology, equipment can be expensive.

So how should you pay for your next equipment purchase? There are four main payment options: cash, equipment loans, leasing or seller-preferred financing. We breakdown all four below.

1. Cash

Purchasing dental or medical equipment with cash can be the easiest and most straightforward way to finance your purchase, but that’s not always possible. Even if you do have cash on hand to pay the full price of the equipment, you may not want to use up your practice’s savings, as it could put a strain on your business should an unexpected event or expense arise.

2. Equipment Loan

Owning your own equipment can provide your business with valuable tax benefits, reduce your overhead expenses and increase profitability. Using an equipment loan allows you to write off the cost of financing (interest expense) and lost value over time (depreciation).

This financing option involves borrowing a specific amount to purchase the equipment, with fixed interest rates and a predetermined repayment schedule. Equipment loans are secured by the equipment itself, providing a sense of security for lenders and often resulting in more favorable terms.

These loans are beneficial for practices looking to spread the cost over time while having the assurance of eventual ownership. It allows practitioners to maintain control over their assets and is particularly advantageous for those with the financial capacity to handle monthly loan payments.

Financing equipment allows you to reduce your tax liability through depreciation, one of the biggest tax benefits of running a practice. Utilizing Section 179 can result in a tax deduction on qualifying equipment and software for up to $1,080,000, which could help lower your taxable income and increase cash flow.

3. Lease

Leasing medical or dental equipment is a popular option for practices looking to conserve capital and maintain financial flexibility, however; the tax benefits are not as advantageous as purchasing with an equipment loan or cash.

With a lease, the equipment is rented for a predetermined period, and regular lease payments are made but you are not able to write off the depreciation. Lease interest rates are often higher than loan interest rates, and lease terms typically include prepayment penalties.

Leasing offers the advantage of avoiding a substantial upfront cost, making it an attractive option for practices with budget constraints. Additionally, at the end of the lease term, there may be the option to purchase the equipment at a reduced price. This flexibility allows doctors to stay current with the latest advancements in technology without committing to a significant upfront investment.

4. Supplier-Preferred Financing

Several suppliers provide financing options that are more attractive than those from third party lending. Many suppliers offer excellent terms, but they are only beneficial if you can pay off the balance during the promotional period. If you cannot, the interest rate will increase significantly once the promotional period ends.

Supplier-preferred financing may include 0% interest for six to twelve months and a period of no payments. Just as 0% auto financing from Chevrolet and Ford motivates car buyers, equipment manufacturers use extremely low financing options to encourage doctors to purchase their products, but the low interest can be deceiving and lead to trouble if you aren’t able to pay it off during the promotional period.

Before deciding how to finance your equipment purchase, be sure you understand your budget and how quickly you can pay it off.

Choosing The Right Equipment Financing Option

According to a report from the Equipment Leasing & Finance Foundation, 79.3% of businesses who acquired equipment or software in 2021 used at least one form of financing (lease, secured loan or line of credit).

There’s no one-size-fits-all financing option. The right choice for your practice depends on your needs and the equipment that you are looking to purchase.

For equipment that may quickly become outdated, leasing offers a lesser commitment and the opportunity to upgrade items more easily. If you need equipment that will last a decade or more, buying with an equipment loan may be a better option and will increase the value of your business assets.

Securing An Equipment Loan

When looking for the right equipment loan, your approval, interest rates and terms will depend on the equipment you’re buying, the practice’s financial statements, your credit score and the lender you choose.

As you select a lender, we recommend not choosing based only on interest rate but also how their support and services will allow you to focus on what you do best — care for your patients. Find more tips for finding a practice lender.

Panacea Financial Equipment Loans

Panacea Financial offers a variety of practice loans built specifically for physicians, dentists and veterinarians. Our equipment loan offers up to $250,000 with approval in as little as 1 hour, competitive rates, and up to 10-year terms.

Founded by doctors, we strive to offer the best products and services to support the doctor community. Find specialized credit structures, competitive pricing, and experienced advice as you start, build, and grow your practice with Panacea Financial. Start your application.