Medical equipment is of uttermost importance for the day-to-day operations of any hospital, clinic, pharmaceutical company, or dental practice. However, it often requires a significant investment, which is not viable for many businesses in the healthcare industry.
While basic diagnostic equipment, such as blood pressure monitors or stethoscopes, can be easily purchased in cash, other types of equipment – such as x-ray machines or ultrasound machines, can go up to $100,000 for a high-tier piece of equipment.
MRI machines can be even pricier, ranging from $225,000 for entry-level machines up to $3 million for premium models.
The problem is that many businesses don’t have the liquidity to buy equipment with their own money. But can you purchase medical equipment with a business loan? Learn more in this article:
Can I Get a Loan to Purchase Medical Equipment?
So, can you get a business loan to purchase medical equipment? The answer is yes – it is an excellent option for companies in the healthcare industry to acquire the equipment they need without having to take money out of their own pockets.
There are multiple business loan options that you can choose from, with repayment terms most commonly ranging from 1 to 7 years, depending on your creditworthiness and the type of loan you are applying for.
The medical equipment you are purchasing often serves as collateral for the loan, which helps reduce the lender’s risk. This collateralization can make it easier for you to obtain the loan, even if your credit score is less-than-perfect.
What Are the Benefits of Purchasing Medical Equipment With a Loan?
Even if you have the cash to purchase medical equipment without taking out a business loan, sometimes it can be a smarter decision to maintain your liquidity intact, and use a loan to make the investment instead.
Here are some of the biggest benefits of purchasing medical equipment with a loan:
- Preserve Cash Flow – Financing your medical equipment allows you to spread the cost over time instead of paying the full amount upfront. This way, you can maintain cash flow for other operational expenses or investments.
- Upgrade to High-Quality Equipment – You may have the cash to purchase low-tier equipment for your medical practice, but upgrading to top-tier can often be impossible without taking out a business loan. Having access to advanced technology can improve patient care and increase operational efficiency.
- Benefit From Tax Advantages – If you are purchasing medical equipment with a business loan, you are eligible for tax benefits, such as deductions under Section 179 of the IRS tax code. You can often deduct the full purchase price of the equipment in the year it’s financed, effectively reducing your taxable income.
- Maintain Working Capital – By preserving your cash and using a loan to finance medical equipment, you also ensure that you are keeping your working capital intact. This gives you more available funds for payroll, inventory, and other expenses.
- Build Business Credit – Purchasing medical equipment with cash won’t build your business credit, but using a loan will certainly do. A strong credit profile can make it easier for you to secure future financing at better terms and rates.
In addition, acquiring medical equipment with a business loan will also make your budgeting easier since loans typically come with fixed monthly payments. Knowing exactly how much you need to pay each month is essential for planning your finances.
Flexible terms, quick access to funds, and a fast approval and disbursement process, if you are applying with National Business Capital, are other great benefits of securing a loan for medical equipment.
What Types of Loans Are Available for Purchasing Medical Equipment?
If you are looking to secure a business loan to purchase medical equipment, the good news is that there are multiple loans for medical practices that you can choose from. Some of the most common ones include:
Business Line Of Credit
While this isn’t technically a loan, a business line of credit is a great financing option that allows you to access a set amount of funds that you can draw from as needed, paying interest only on the amount you use.
The requirements may vary by lender – with National Business Capital, you will only need one year in business to generate at least $500,000 in annual revenue.
This financing alternative gives you the flexibility to finance multiple smaller purchases instead of taking out a single loan for a large piece of medical equipment.
Medical Equipment Financing
Of course, if you are looking to finance a large piece of medical equipment – such as an MRI machine or an ultrasound machine, medical equipment financing can be a much better option. This type of financing can reduce your overhead costs and improve your cash flow, all while allowing you to upgrade to a more advanced technology for your business.
Medical equipment financing is specifically designed for purchasing medical equipment, which allows you to borrow funds based on the cost of equipment you need. The equipment itself typically serves as collateral, and you can get up to 100% financing.
Business Term Loans
Term loans are probably the most common financing option for medical businesses, as they can be used for any purpose – from purchasing medical equipment to covering unexpected expenses or investing in new technology.
This type of funding allows you to get a lump sum of money, and pay back what you borrowed over a flexible term – ranging from a few months up to 25 years depending on a wide range of factors.
SBA Loans
If you are looking to purchase medical equipment, you can also opt for SBA loans – government-backed programs supported by the Small Business Administration (SBA), which are associated with lower interest rates and longer repayment terms.
The Small Business Administration (SBA) offers various loan programs, such as the SBA 7(a) and SBA 504 loans, which can be used to finance medical equipment.
However, they typically require more documentation and time process – up to 8 months if you are applying without National Business Capital and up to 45 days if you are applying with National Business Capital.
Who Can Benefit From Purchasing Medical Equipment?
Purchasing medical equipment can benefit a wide range of organizations within the healthcare industry, such as:
- Hospitals and clinics
- Private practices
- Outpatient care centers
- Home healthcare providers
- Nursing homes
- Assisted living facilities
- Rehabilitation and physical therapy centers
- Veterinary clinics
- Medical laboratories
- Pharmaceutical companies
- Dental practices
- Public health organizations
In other words, it can benefit any organization or healthcare institution that requires medical equipment in order to conduct its daily operations. The right equipment can enhance the quality of care, improve operational efficiency, and lead to better financial performance.
Getting a Business Loan to Purchase Medical Equipment: National Business Capital
If you want to qualify for a business loan to purchase medical equipment, look no further than National Business Capital. With $2+ billion financed since 2007, multiple awards, and an experienced team of Business Finance Advisors, we have everything you need to find the best financing options for your project.
Are you ready to get started? Apply here.
Frequently Asked Questions
How Much Can I Borrow for Medical Equipment?
The amount you can borrow to purchase medical equipment typically depends on the cost of the equipment, your business’s financial health, and the lender’s policies.
Lenders may finance up to 100% of the equipment’s value, with loan amounts ranging from a few thousand to several million dollars. Factors like creditworthiness, the type of equipment, and whether it’s new or used can also influence the maximum loan amount available.
What Interest Rates Can I Expect?
Interest rates for medical equipment loans generally range from 4% to 18%, depending on factors like the type of loan, lender, your business’s credit profile, and the loan term.
Well-established businesses with strong credit may secure lower rates, while higher rates might apply to newer businesses or those with weaker credit. The specific equipment being financed can also influence the interest rate offered.
What Are the Typical Loan Terms for Medical Equipment Financing?
Typical loan terms for medical equipment financing range from 1 to 7 years, depending on the lender and the type of equipment.
Shorter terms usually result in higher monthly payments but lower overall interest costs, while longer terms spread out payments, making them more manageable but potentially more expensive in total. The equipment’s lifespan and your financial situation often guide the chosen loan term.
Can I Get a Loan for Used or Refurbished Equipment?
Yes, you can get a loan for used or refurbished equipment. Many lenders offer financing for pre-owned medical equipment, although the terms may differ from those for new equipment.
Interest rates might be slightly higher, and loan amounts may be lower, depending on the equipment’s age, condition, and resale value. This option can be cost-effective for businesses seeking to reduce upfront expenses.
What Are the Tax Benefits of Financing Medical Equipment?
Financing medical equipment can offer tax benefits, such as deductions under Section 179 of the IRS tax code. This allows businesses to deduct the full purchase price of qualifying equipment in the year it’s financed rather than depreciating the cost over time.
Additionally, interest paid on the loan may be tax-deductible, further reducing your overall taxable income and making financing more cost-effective.
Disclaimer: The information and insights in this article are provided for informational purposes only, and do not constitute financial, legal, tax, business or personal advice from National Business Capital and the author. Do not rely on this information as advice and please consult with your financial advisor, accountant and/or attorney before making any decisions. If you rely solely on this information it is at your own risk. The information is true and accurate to the best of our knowledge, but there may be errors, omissions, or mistakes.
Joseph Camberato
Joe Camberato is the CEO and Founder of National Business Capital. Beginning in 2007 out of a spare bedroom, Joe and his team have financed $2+ billion through more than 27,000 transactions for businesses nationwide. He’s made it his calling to deliver the educational and financial resources businesses need to thrive.
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