{"id":2998,"date":"2018-06-01T00:00:31","date_gmt":"2018-06-01T07:00:31","guid":{"rendered":"https:\/\/todaysveterinarybusiness.com\/?p=2998"},"modified":"2024-10-02T12:30:04","modified_gmt":"2024-10-02T16:30:04","slug":"cash-or-credit","status":"publish","type":"post","link":"https:\/\/navc.sitepreview.app\/todaysveterinarybusiness.com\/cash-or-credit\/","title":{"rendered":"Cash or Credit?"},"content":{"rendered":"

Any successful veterinary practice needs the right equipment in place, whether that means outfitting a start-up operation, adding a surgical suite or simply replacing a tired X-ray machine with a state-of-the-art model. Researching all the particulars can become a lengthy process as team members make sure they select the right piece of equipment for the right job at the right time.<\/p>\n

For too many practices, however, the homework ends there. What veterinarians, practice managers and other procurement people aren\u2019t always as knowledgeable about are the financing options that will help make the best decision in support of the bottom line.<\/p>\n

Flush with Cash?<\/h3>\n

Borrowing money to buy equipment is understandable if you don\u2019t have a large cash reserve. But what if you can pay in full? Obviously, you\u2019ll avoid the costs associated with a loan, but that might not be your best strategy.<\/p>\n

Although loan payments are not tax deductible, depreciation and interest often are. Accelerated depreciation methods, such as Section 179, allow you to take up to 100 percent of the depreciation in the year you purchase the equipment.<\/p>\n

And there\u2019s something to be said about keeping the cash stash intact in case of an emergency or investment opportunity. Before deciding, ask your accountant about cash-flow considerations and whether deductions might prove beneficial for your practice.<\/p>\n

When Is a Lease Not a Lease?<\/h3>\n

When it comes to financing an equipment purchase, it is important to first understand the terminology. Traditional lenders in the equipment arena often use the term \u201clease\u201d instead of \u201cloan.\u201d However, this doesn\u2019t mean you rent the equipment for a designated period and never take ownership, which is known as an operating lease. Rather, they are referring to a finance, or capital, lease.<\/p>\n

\u201cThese leases require no money down, which enables practices to immediately get a return on their investment,\u201d said Scott Preiser, general manager of equipment finance at Live Oak Bank.<\/p>\n

\u201cSeventy-five percent of all our business is through these capital leases, which have a $1 purchase option at the end of the lease.<\/p>\n

The bank purchases the equipment and holds the title until the lease ends and the dollar is paid.<\/p>\n

Equipment finance agreements are essentially the same as capital leases but have additional liability protection for the lessor.<\/p>\n

Choosing the Best Partner<\/h3>\n

An equipment sales representative no doubt will have recommendations for lenders found to be reputable and reliable. (Your options might be limited if you are purchasing used or highly specialized equipment).<\/p>\n

If you\u2019ve already established a positive relationship with a lender, don\u2019t hesitate to insist on partnering with them again. But if this is your first foray into lending, look beyond the interest rate offered and take a close look at the services and support each lender offers, as well as its longevity and reputation. Consult other practices, trade associations and professional organizations about their experiences.<\/p>\n

Consider asking these questions of your prospective lender:<\/p>\n