To stay abreast of clinical and technological advances, chiropractors need to make periodic investments in their practices, and state-of-the-art equipment can enhance clinical effectiveness.
Whether patients are suffering from lower back pain or need help with other muscular and neurological functions, chiropractors are there to help.
But without the right tools, chiropractic patients may not be able to fully benefit from a robust treatment plan. For DCs who may not have the cash for an outright purchase to upgrade existing equipment or implement new technology and improve their practices’ performance in patient care, financing can be a viable solution.
What is equipment financing?
As with anything these days, new versions or models of equipment and technology are always being released. But unlike some consumers who enjoy yearly smartphone upgrades, you likely don’t need to upgrade most equipment on a continual basis. But large purchases such as upgrading computer systems, replacing office furniture, or moving to digital imaging in your practice represent large semi-annual to once-in-a- lifetime purchases.
This is where financing comes in and why it’s beneficial. By choosing this option, practices are able to buy outright anything they need. Many times, the equipment acquired not only improves the ability to offer quality care, but is revenue-generating as well. This allows the practitioner to evaluate the acquisition from a return- on-investment (ROI) perspective, while other acquisitions provide core functionality to manage and operate the practice, such as a copy machine or computers. Financing these types of purchases even makes sense for practices that are small or mid-sized businesses.
The size of the practice factors less than the questions of whether the new equipment will add value to the practice and if the practice can afford the additional monthly payment. And with improved outcomes of care, patient perception of the doctor operating in a modern practice setting can create high cultural authority in the community.
Types of financing to consider
When considering the acquisition of a new piece of equipment, there are several options and types of financing. The two most common are a lease or an equipment finance agreement.
These are similar, with the primary difference being who holds title to the equipment during the time you are making the payments.
With a lease, the lender holds title, and once you complete your payments, you then receive title and legally own the equipment. With an equipment finance agreement, you take title immediately; however, the lender takes a security interest in the form of a Uniform Commercial Code (UCC) filing while you are making the payments. From a financial point of view, they are virtually identical. And both allow the borrower to take advantage of any tax benefits that may be available.
Additionally, the equipment being purchased can also be used to secure the loan, so your practice may not need to put up additional collateral. Typically, the value of the collateral is sufficient to secure the loan, along with the practitioner’s guarantee that the loan will be repaid.
Ultimately, equipment financing provides an affordable and effective way for chiropractors to obtain the equipment they need to remain competitive and current in a rapidly changing healthcare landscape. As this is a loan from a financial perspective, however, interest rates are always an important consideration.
Taking out this type of loan doesn’t require as much documentation as you might expect. This harkens back to the fact that the equipment can often be used as collateral, although credit scores and financial history will be important factors in the eyes of the lender.
The benefits of group purchasing
As you think about the purchases you need to make for your practice, group purchasing can be a viable option to ensure you get the most for your money. Traditionally, group purchasing organizations (GPOs) have only been available to large healthcare systems or organizations that purchase a high volume of products.
But DCs can still access GPOs through programs that take advantage of reduced costs on products and large purchases. Where you buy can make a significant difference in the amount of financing you will ultimately need.
What about tax incentives?
Arguably, the biggest benefit of financing comes in the form of tax incentives. Known as Section 179, businesses can claim this deduction that allows them to depreciate the full purchase price of financed equipment in the current tax year.
As of January 1, 2016, the deduction limit is $500,000. Types of equipment you can purchase through financing include:
- Off-the-shelf computer software
- Office furniture
- Office equipment
- Diagnostic or therapeutic equipment
Industry-specific equipment can also be deducted. The key factor is it has to be for business-use only. The deadline to claim the Section 179 deadline is December 31, 2017. By midnight on that date, the equipment must have been purchased and put into service. Do consult your tax advisor on the use of the Section 179 deduction, as individual situations can impact one’s ability to take advantage of this important tax benefit.
Financing the purchase of new or used equipment is a smart business move. It allows you to obtain the infrastructure you need to deliver good treatment outcomes and preserve cash reserves for other uses to grow your practice.
Scott Stewart is the CEO of OnePlace capital and has a rich history of providing affordable financing options for chiropractors. OnePlace capital is a business partner with Best Practices Academy. he can be reached through Best Practices Academy at firstname.lastname@example.org or 877- 788-2883.