Equipment Financing vs. a Traditional Loan: What’s Best for My Business?

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Ways To Save Money in Your Medical Practice

By John-Paul Smolenski, Founder and CEO of MMP Capital

The ability to purchase a major piece of equipment can make or break a small healthcare practice. Unlike large conglomerates, the sole owner of a veterinary practice or dental office may not have the funding available to upgrade or suddenly replace equipment. One way to avoid laying out much-needed cash or working capital is through equipment financing. 

Equipment financing is a $900 billion dollar industry that has emerged as an alternative to traditional bank loans. Why do so many business owners consider equipment financing instead of their local bank when making an investment in their business? There are three key advantages every practitioner should consider.

Low Interest Rates

For a business to get approved for financing, it generally needs collateral. This is understandable as lenders want to be sure that their risk is minimal in the case of a default. With equipment loans, the purchased asset acts as collateral; allowing the lender to grant favorable terms. This is possible even if the credit score does not rival a blue-chip company or the annual revenue isn’t in the seven-figure range. 

Equipment loan finance companies might even overlook how long a business has been operating when collateral is in the picture. For this reason, even small businesses with a subpar credit rating, an imperfect balance sheet, imperfect cash flow, or less than two years of activity can apply through an equipment loan financing company. In short, if the same company would apply for a standard term loan, the situation would be different. It would have to pay higher rates with a short-term business loan because it does not have collateral to reduce the risk.

Quick and Simple Application

Many equipment finance providers, like MMP Capital, are hybrid lenders. That means they can lend directly through their own private funds or utilize a partnered syndication outlet. This distinction offers flexibility in loan terms and qualifications that simply cannot be matched by a single institution.

Equipment financing loans are also often approved within hours, versus weeks and months, and typically do not require the arduous process of paperwork and interviews that borrowers face when applying through a traditional lender.

Personalized, Modern Service

In today’s digital age many consumers know what they want, and they want it now.  Very few lenders have adapted to the modern-day consumer, in fact most lending companies still burden consumers with requests for piles of paperwork.  Some lending companies also still require consumers to have to come to their office and sit down for an hour, shake hands, and then consider the application.  Select few companies, like MMP Capital, embrace modern technology, which most customers prefer.  

Specialized finance providers also take the time to learn about their consumers, what they purchase, why they are purchasing it, how it will help them.  MMP Capital customers often work with the same representatives over and over, with relationships spanning 15-20 years.  Consumers can text their representative for any requests for financing of new equipment at any time, with turnaround in 5-10 minutes not 3-6 months. Beyond the initial finance transaction, equipment finance lenders can even track a customer’s performance through custom analytics. With this surgical approach to their consumer base, finance companies offers a much better experience for customers who can get answers in real time.  

Advancements in technology, including telehealth, mobile health, and electronic medical records, require that healthcare practitioners upgrade their office regularly or risk losing patients who will not be pleased if their procedure is delayed due to a piece of broken equipment. Many practitioners also leverage financing to buy equipment that allows them to offer services not typically covered by insurance.  Paid for by the patient directly, that is immediate revenue for the healthcare office, without the headache of dealing with health insurance companies.   

Whether a practitioner is hoping to upgrade or to replace a breakdown, purchasing equipment costs money and maintenance and can put a strain on cash flow. By financing equipment instead of purchasing it outright or borrowing at a high interest rate through a traditional lender, practitioners will have a more cash on hand. This offers protection if the practice experiences a slow period, and also allows the company to use its own money for other purposes, such as marketing or hiring.

Ultimately, healthcare offices that keep their technology up to date can offer better patient care and attract/retain patients more effectively.  Healthcare practitioners should consider all financing options and speak to a specialist to make sure their decision is right for their bottom line.

About John-Paul Smolenski

As the founder and CEO of MMP Capital, a leading equipment finance provider, Smolenski has worked with businesses of all sizes to provide the funds they need to update their office or provide an additional avenue of cash flow.  Over the past 8 years, MMP Capital has become a market leader in medical financing and has gained market share due to the company’s positive reputation inside the industry. To learn more about MMP Capital’s streamlined approach to healthcare financing, visit www.mmpcapital.com.

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