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Capital Equipment Financing: Line of Credit vs. Financial Company

Posted by Chris Sharrock

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Oct 14, 2016 3:52:20 PM

:: 2 minute read ::

capital_financing.jpgUnless you happen to have an inheritance from a wealthy uncle laying around, you'll probably need to look into financing to get your standalone clinic off the ground. In most cases, the independent doctors we work with explore two main options for financing:

• Their line of credit (LOC)

• A financial company

Along the way we've seen the pros and the cons, of each of these options. Take a look below to see what we've learned about financing equipment for a standalone medical startup.

Line of Credit

Pros:

• As we write this (Oct. 2016), banks have interest rates between two and three percent lower than financial companies.

• You may have a higher level of comfort and a stronger relationship with your bank at the local level.

Cons:

• The interest rates at banks are variable on an annual basis. The typical term for capital equipment financing is five years, so there is a greater risk of encountering a rate hike when you use an LOC. 

• When you are getting your pain clinic started, it may not be wise to use up your entire LOC for a capital equipment purchase. Having that LOC in your back pocket is a useful option for unexpected expenses, payroll, and other operational costs that may emerge and re-emerge on a periodic basis. 

Financial/Leasing Company

Pros:

Working with a financial company preserves your LOC for working capital.

Financial companies offer fixed interest rates over the typical five-year term as opposed to the variable, one-year rates on an LOC through a bank.

Cons:

• The approval process for many startups can be more difficult through a financial company.

• Interest rates through financial companies are currently higher than bank rates.

A Blended Approach

In many cases, pain docs we've worked with have had success financing their equipment by taking a bit from more than one financial "camp". Here are the methods we've seen work the best.

LOC plus financial company:  A prominent strategy is to split your financing between whatever you can get approved for through a financial company and your LOC. This allows you to lock in your interest rate and only need to supplement out of your LOC and keep the majority of it available as working capital.

Equipment "rent-to-own": Another blended option is to look for an equipment rental agreement where a portion of the rental fee goes toward eventually purchasing the unit. This is a rental type that we offer at Block Imaging for a number of modalities. Once your facility's credit is more firmly established, part of the system is already paid down and the capital expenditure will me more manageable. 

Request imaging equipment rental

The Takeaway

The big idea we hope you'll take away from this list is just how many options there are for financing your facility's equipment needs. And where there are options, there are opportunities to get what you need in the most manageable way possible. 

Once you find the best financing option for your clinic, the Block Imaging team is ready to help you find the best equipment options. If you're ready to start the conversation, use the button below to contact us and tell us more about your project.

Request a Quote

Written by Chris Sharrock

author of blog post

Chris Sharrock is the Vice President of Equipment Solutions at Block Imaging. Sometimes referred to as the “The C-Arm Guy”, Chris has a passion for music, fitness and genuinely enjoys helping others make decisions about c-arms and fluoroscopy equipment. You can download Chris’ very popular “C-Arm Buyer’s Guide” or connect with him here.

Topics: C-Arm

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