Revolutionizing Healthcare Financing: The Power of Operating Leases for Medical Equipment Acquisition

In the intricate world of healthcare, the acquisition of medical equipment stands as a pivotal capital investment in the establishment of hospitals, nursing homes, and diagnostic centers. Traditionally, healthcare providers relied on bank loans for equipment procurement. However, an array of factors, including escalating healthcare delivery costs, heightened competition in concentrated healthcare clusters in Tier 1 cities, rapid technological advancements, and high leverages, has prompted healthcare providers to explore alternative financing avenues for acquiring crucial capital equipment.

Exploring Alternative Financing: The Role of Operating Lease for Medical Equipment

Enter operating lease—an ideal alternative for acquiring medical equipment. With operating leases, healthcare providers gain the flexibility for accessible technology upgrades and capacity/software enhancements. Crucially, this option ensures financial flexibility, avoiding strain on credit lines, and offers adaptable repayment structures.

Demystifying Operating Leases: Embracing Off-Balance-Sheet Financing

An operating lease is a contractual agreement allowing the use of an asset without conveying ownership rights. The term 'off-balance-sheet financing' signifies that the leased asset and associated liabilities, such as future rent payments, do not reflect on a company's balance sheet. Operating leases, historically, have enabled companies to maintain lower debt-to-equity ratios by keeping assets and liabilities off the balance sheet.

Understanding the Criteria for Operating Leases

For a lease to qualify as an operating lease, it must meet specific criteria under generally accepted accounting principles:

• No title transfer to the lessee at the end of the tenor.
• No bargain purchase option at the end of the tenor.
• The lease term should not exceed 75% of the asset's economic life.
• The present value (PV) of lease payments should not exceed 90% of the asset's fair market value.

Advantages of Embracing Operating Leases

• No/Low Initial Investment: Enjoy up to 100% financing, covering soft costs and taxes, with a potential small security deposit.
• Flexible monthly rentals: Structured based on the estimated cash flow of the equipment.
• Tax Benefits: Lease rentals contribute to the Profit & Loss Account, offering notable tax advantages.
• Capital/Credit Line Conservation: Save capital and credit lines for alternative uses, including investments, improvements, and expansions.
• Avoiding Technological Obsolescence: Operating leases provide the feasibility to replace or update devices with minimal cost, preventing obsolescence.

Partnering with Finbot: Tailored Leasing Solutions for Healthcare

Finbot with deep domain expertise and technology platform will help customers in building the suitable leasing model based on the equipment, projected caseload/cash flows and tax benefits.