Financing EV Chargers for Business: A Practical Guide
Electric Vehicle (EV) chargers are becoming more common – and it’s happening fast. They serve as the power source for electric vehicles, which are...
4 min read
Rob Misheloff
Aug 12, 2014 3:56:00 PM
We get calls from a lot of businesses in different medical specialties about leasing new or used ultrasound machines. The two biggest questions we get are how to qualify and what the costs will be, so let's go ahead and answer these two basic questions.
Most owners of established businesses with good credit know they'll qualify for leasing.
We get these questions from three types of borrower:
Let's talk about qualifying in each of these situations:
There are many equipment vendors and equipment leasing companies that will not provide financing to businesses less than 2 years old because they are uncomfortable with the risks involved in lending to a new business - according to the SBA half of new small businesses fail in the first 5 years.
We help plenty of new businesses get financing for equipment, though standards are a bit tighter than for an established business.
If you've got good credit, or at least decent credit, there shouldn't be any problem qualifying to finance your equipment. Costs will be higher, commensurate with the risks (we'll cover costs in the next section).
We get many inquiries from people about leasing with bad credit, although half the time when we find your credit score, it's not really that bad. In general, if your credit score is at least in the 600's, if you've been in business at least two years and aren't about to go bankrupt, there won't be a problem financing you.
If you're a new business owner and your credit is below 600, it will be a real challenge to find you financing, although with collateral or a 50% down payment, it's not impossible - but financing won't be cheap.
We find there's always a little bit of confusion about the term "equipment leasing." Some people think we're talking about renting machines, while others don't realize and equipment leasing company can facilitate both leases and loans. Let's start with talking about the different types of equipment acquisition so that we can be clear about what the costs are.
Other than paying cash, there are 3 basic ways to get an ultrasound machine:
When talking about equipment rental, that's the same as when you rent a car. You can rent for days, weeks, or months. Just like car rental, the costs on a monthly basis will be 2 to 4 times the costs of if you just made payments against a finance agreement.
If you need equipment for long term, rental just doesn't make sense. The only time rentals would be acceptable for long term use is if you absolutely can't run your business without that piece of equipment and can't get financing anywhere.
As opposed to rental, leasing medical equipment is like leasing your car. You make payments against the machine for a set period of time, typically 2 to 5 years, and at the end you can buy the equipment for a fixed residual or you can let the equipment leasing company take possession of the equipment.
Leasing is lower than the cost of a loan, also called an Equipment Finance Agreement (EFA), on a monthly basis, but that 's not the real reason companies choose to lease. Leasing is extraordinarily "tax-friendly" - you may write off the entire payments as an operating expense.
An equipment finance agreement is like buying a car and getting a loan on it. You make payments over a set number of years, 2 to 5, and own the equipment at the end (you make a final payment of $1).
The monthly payments will be a little bit higher than on a medical equipment lease, but you won't have a residual at the end. You can either write off the entire cost of the equipment (up to $25,000) immediately, or have your accountant depreciate the equipment over time.
How much you will pay monthly depends on a few things, namely,
Let's assume you're buying a used machine for $20,000 (so if you're buying a $40,000 machine, just double the numbers that follow, etc.)
If you're new in business, your costs will depend somewhat on your credit history, let's look at the following costs for a lease (with a loan, it's safe to assume the payment just increases by about 8%)
Costs are lower in leasing if you've been around a couple of years. Let's do the same calculations we did above, but for a business that isn't new.
Smarter Finance USA can help you finance your ultrasound machine. For more information, click here or give us a call at (866) 631-9996.
Electric Vehicle (EV) chargers are becoming more common – and it’s happening fast. They serve as the power source for electric vehicles, which are...
The economic turmoil caused by the coronavirus pandemic has had an impact on small businesses everywhere. The Economic Injury Disaster Loan (EIDL)...
As a small business owner, you know you need access to capital…