One of the hardest things about starting and maintaining a business, especially in the medical industry, is funding the capital equipment you need. There are a couple of equipment financing options available for this type of purchase and knowing some key points about each type can help you find the right one for your business.
What Is Capital Equipment?
The simplest definition of capital equipment consists of items used by your company to produce services or commodities. These items are not disposable, meaning they are used for at least one year, and they usually cost more than five grand including tax, transportation and installation. Capital equipment is also stand-alone units, meaning that the items are not pieces of a bigger setup, and is tangible personal property which can be appraised. You can also purchase add-on equipment which extends the life of capital equipment and is added to the value of those items, software that is necessary to the function of the equipment or software on its own which costs more than five thousand dollars.
What Are the Benefits of Leasing It?
One of the equipment financing options you have available for capital equipment is a lease. This option usually means less upfront and lower monthly payments than a loan, and some leases will give you the option to purchase or return the equipment at the end of the term. When you return the equipment, you can sometimes get a deal on leasing the newer model for your next term. Not all equipment sees significant upgrades in the short-term, but for items which do, this can be the cheapest way to always have the newest technology.
What Are the Benefits of Buying It?
Some of the benefits of buying the equipment instead of leasing it include getting better terms because the equipment itself serves as collateral on the loan, and the fact that payments are usually spread across the estimated lifespan of the equipment instead of a standard number of years. Once the loan is paid off, you own the equipment and can use it or trade it in for a newer model according to your needs.
Equipment financing can be done in many ways and the two most popular for capital equipment are leases and loans. Both options have benefits that can appeal to you and usually, the choice comes down to which benefits best meet the needs of your company.