The healthcare industry is expanding at a rapid pace. As more Americans enter their golden years, demand for long-term care facilities and general medical practices will continue to grow. Although this new paradigm presents significant opportunity, it can be extremely costly.
Healthcare is seeing a lot of transformations both in terms of emerging and existing healthcare services. This is changing the very nature of the industry and creating intense competition among local, regional and national health providers. As a result, healthcare is expected to generate the fastest jobs growth of any sector over the next ten years.
If you’re in the healthcare industry, you may be wondering, is my practice capable of meeting this growing demand? If scaling up is your concern, you are definitely not alone.
Running a healthcare organization is becoming more expensive. To keep costs under control, healthcare providers are delaying investment plans, such as purchasing the latest equipment. While this may be a suitable strategy in some industries, healthcare isn’t one of them. That’s because providing optimal care often requires having access to the latest equipment.
Luckily, there are financing options available to help healthcare providers maximize their growth efforts. At the same time, they can ensure health providers have the means to offer the best care for their patients. This includes financing solutions for upgrading equipment and improving long-term care facilities.
Equipment Financing vs. Leasing: What You Need to Know
If you’re looking to acquire medical equipment or replace outdated technology, there are generally two options available to you: equipment financing and equipment leasing. Both provide an effective means to supply your organization with the equipment and technology it needs.
Equipment financing can provide you with a loan to replace old equipment or buy new ones. However, it’s important to note that these loans typically require a down payment. They are also collateralized against the equipment you have purchased.
In general, any type of medical equipment that is needed to run your practice can be financed. Examples include office furniture and lab equipment.
Leasing provides many of the same benefits as financing and does not require a down payment. It is considered ideal for technology that you expect to replace every few years. However, unlike financing, leasing does not give you ownership from the start.
To learn more about the difference between equipment financing and leasing, check out: Equipment Financing: What are the Options?
Advantages of Healthcare Financing
Given the sheer costs of running a successful healthcare practice, financing offers practical benefits. Below are five key advantages financing offers to the healthcare industry.
1. Tax Deductible
In the case of leasing, the IRS doesn’t consider the acquisition of healthcare equipment to be a purchase, but a tax-deductible overhead expense. This means you can deduct the lease payments from your income, which can lower the net costs of the lease.
2. Maintain Cash Flow
Financing equipment instead of buying it outright enables healthcare practices to preserve capital and maintain cash flow. In the case of a lease, 100% of the equipment can be financed at the outset.
3. Easy Equipment Disposal
Whether you are leasing or outright owning own your medical equipment, financing allows you to upgrade without having to manage equipment disposal. Financing equipment takes the hassle out of disposal and replacement.
4. Streamline Training and Support
Equipment financing can help you streamline many of the “soft costs” associated with new equipment. These soft costs include training of staff, technical support and other important services. Many of these services come bundled into one monthly lease or loan payment.
5. Outsourcing Equipment Management
With a lease or loan, healthcare organizations can easily outsource their equipment management. This allows the organization to focus on providing optimal healthcare services instead of having to retain additional in-house staff.
Financing Healthcare Facilities
Healthcare organizations looking to expand their operations also have the benefit of obtaining commercial real estate loans. These loans provide the necessary capital to fund large capital projects, such as new healthcare facilities.
The number of Americans aged 65 or older is expected to more than double by 2016. For health providers, this is an opportunity to serve a growing market. Expanding existing health facilities or investing in new ones are some of the strategies health providers are considering.
This is something the U.S. government has even recognized. According to a 2014 report from the U.S. Census Bureau, an aging population could result in “increased demand for assisted-living arrangements or institutional care for couples.”
With a commercial real estate loan, healthcare organizations can finance:
- Assisted-living facilities
- Disability care centers
- Independent care centers
- Medical office buildings
- Seniors housing and retirement homes
Red Door Capital offers a wide range of real estate loans and services with a focus on assisted-living facilities. Our Real Estate services page offers more information.
To learn more about financing long-term care facilities, check out: Assisted-Living Facility Financing: The Financial Side of Long-Term Care.
Red Door Capital Advantage
Red Door Capital offers custom financial solutions for medical practices, healthcare companies and other health-related businesses. Funding amounts are typically much larger because we are able to leverage your future insurance receivables to unlock funding. This includes government and private health insurance.
Additionally, we can secure medical accounts receivable factoring and lines of credit based on pending claims, personal injury and worker’s compensation. With Red Door, you can:
- Decide if your project is profitable
- Overcome lending constraints
- Obtain a favorable loan structure
To learn more about our healthcare financing, contact us today.
Avant Healthcare Professionals (January 26, 2016). “Healthcare Industry Will See Most Growth Over Next Decade According to U.S. Bureau of Labor Statistics Report.”
Carol Marak. Trends in the industry: Evolving Trends in the Assisted Living Industry. AssistedLivingFacilities.org.
Equipment Financing Advantage. Equipping Business for Success: Equipment leasing Is Still a Good Idea.
Scott Daugherty (July 25, 2011). “12 Benefits of Leasing Equipment.” Health Leaders Media.
Jennifer M. Ortman, Victoria A. Velkoff, and Howard Hogan (May 2014). An Aging Nation: The Older Population in the United States. U.S. Census Bureau.