How equipment financing can boost hospital cash flow and competitiveness.

By Scott Schrader

Your department needs the right tools for the job. One of those tools is finding the most efficient way to purchase medical equipment needed to safely care for patients.  Did you know that when your hospital purchases medical equipment, you pay a large amount of capital upfront? This can negatively affect hospital cash flow. But by using alternative equipment financing, you can reduce expenditure without sacrificing patient care.

Today, hospitals are utilizing equipment financing practices because it allows them to purchase the medical equipment they need at a significantly lower price. Basically, it helps to avoid damaging cash flow. Judicious capital equipment purchasers need to understand equipment financing and how it can help them stay financially sound, even during difficult times. 

Equipment Financing Is Different

In a traditional equipment loan, when a company borrows money from a lender, they are free to do what they want with the money. But, in an equipment financing loan, the money must be used specifically for acquiring operating equipment; and the equipment itself is collateral against the money borrowed.

You may be wondering, “How can equipment financing benefit my hospital?” Here are five ways financing your equipment can boost operations:

1. More Capital Availability

The main reason hospitals choose equipment financing is that it increases their available working capital. All hospitals, especially small- to medium-sized ones, will experience cash flow shortages at some point. Having more available capital frees up working capital. This allows funds to be reallocated to other areas of the hospital, such as hiring more clinicians and investing in new cybersecurity software.

Purchasing medical equipment, especially large or new devices, can put a significant dent in your available cash flow. It basically puts your hospital at a greater financial risk down the road. The beauty of equipment financing is device owners can reduce this risk and take greater control of their overall financial situation.

2. Avoids Obsolescence

One problem with rapid technological innovation is that it can become expensive to maintain the latest devices. This is particularly true in healthcare, where newer models of previous devices are regularly released into the market. State-of-the-art equipment does not come cheap, and many hospitals cannot afford to procure the latest and greatest technologies. This makes it harder to attract new patients and top clinicians—potentially stunting your hospital’s growth. Outdated equipment also causes a drop in productivity and safety—with the latter having possibly devastating implications from a patient care perspective.

3. Receive Full Ownership

Following the full repayment of the agreed-upon loan, you have the option to receive full ownership of the equipment you financed. It’s a huge benefit if the machine or device is unlikely to become obsolete too quickly. Another plus: You can possibly resell the piece of equipment later, and all the money goes directly to your bottom line.

4. Obtain Funds Quickly

With some equipment financing companies, the process of obtaining funds can be more difficult than necessary. When you partner with the right equipment financing company, however, the process is usually quite simple—allowing you to access the funds you need faster. The specific time frame depends on the equipment financing company you choose and the amount of capital you want. In many cases, you can have access to funds in under 24 hours from the time you first apply.

5. Access to Lines of Credit

Equipment financing allows hospitals to utilize other lines of credit that would have otherwise been off-limits. The predictable monthly expenses allow hospitals to have other credit lines open, in addition to receiving additional types of financing.

Final Thoughts

Financially savvy hospitals are turning to equipment financing as their preferred way to obtain needed devices. If you prefer to finance your medical equipment, make sure to partner with trusted experts and industry leaders. In the end, consulting with experienced equipment financing companies helps you make the right decision for your hospital—and patients.

 Scott Schrader is director of marketing, business development, and product development at Meridian.