Leasing or financing a digital x-ray system may seem like a daunting task, but it doesn't have to be. There are many different ways to finance or lease a digital x-ray system, and each has its own benefits and drawbacks. We'll explore the different ways you can finance or lease a digital x-ray system so that you can make the best decision for your business. We'll also discuss some of the factors you should consider when making your decision. So, whether you're planning to buy or lease a new digital x-ray system in 2022, this blog post is for you!
What x-ray equipment can I finance?
At Maven Imaging we have our own in-house financing program that allows you to finance everything from your x-ray system, to your DR panel, as well as any software that's related to the system; your acquisition software, viewing software, or even a PAC system. We can also include services like installation, lead shielding reporting, and even your electrical and building in-room build out costs all together in your financing.
Different ways to lease x-ray equipment
There are many different ways to lease x-ray equipment, and that's part of the reason why leasing is such a popular option. Whether you're looking at a one dollar buyout, fair market value lease, or bank loans, every equipment lease has its own pros and cons.
One dollar buyout
A one dollar buyout is an agreement with the bank or lender, where you lease the digital x-ray system for a certain period of time. Typically the lease period will range from 24 months to 72 months, during which you're making a monthly payment to them.
At the end of the lease term, you can end up owning that equipment by giving them a nominal amount of money. Often this is one dollar but in some states it can be more than a dollar, perhaps one hundred dollars. Generally, it's a small, nominal amount that ends up providing you with the title and the equipment at the end of the lease term.
Fair market value lease
Another common leasing option which is similar to a vehicle lease is a Fair Market Value (FMV) lease. FMV leases typically come with a lower monthly payment, but at the end of the term, you will have to pay the fair market value or whatever amount was agreed upon in your lease for the buyout.
An FMV lease is well suited for someone that wants to be able to renew or refresh their equipment on a regular basis and doesn't actually want to own the equipment. Once the lease term is done you will have the option to buy out the x-ray equipment.
You can also apply for loans from your bank to help with financing. Your local bank can provide you with great financing options, including Small Business Administration (SBA) loans. If you qualify, you can utilize an SBA loan to finance your x-ray equipment.
Equipment finance agreement
An equipment finance agreement allows you to be able to pay your loan down with similar monthly payments to a one dollar buyout agreement, but there is no one dollar buyout at the end of the term. Once your term has been completed, you will then own the equipment.
Types of lenders
There's a few different types of lenders that you can turn to to help finance x-ray equipment. One of those types of lenders is banks. There's also independent leasing companies, which are leasing companies that either have raised money or have access to capital, and provide loans or leases. There are also brokers which work with either multiple banks or multiple independent leasing companies to be able to find you the right loan or lease.
Typically, banks will have lower interest rates and often the best terms. However, banks also have some of the most stringent and strict lending guidelines and policies. Banks often won’t work with startups, those with credit scores that are below 700, someone that's had a bankruptcy or had previous issues with credit and so on.
Equipment leasing companies
Equipment leasing companies, on the other hand, have a more open credit box because they're not regulated in the same way that banks are. Equipment leasing companies typically borrow from banks to be able to utilize their capital, or they have their own fund. This gives them the luxury of being able to work with people with more challenging credits like startups or certain industries that are more prone to risk. This means there's a wide variety of different types of borrowers that they will lend to.
Equipment leasing companies rates and programs are not going to be as competitive as your traditional banks. However, it does give you the opportunity if you have some negative impacts on your credit or if your startup or if you have some credit challenges. They are a great option and their rates are usually variable. They can go anywhere from 6-7%, all the way up to 30%, depending on credit risk. Whereas for banks you're looking at probably an average rate of around 5-6%.
Brokers are another option which work with a variety of different banks, lenders and equipment. Brokers are helpful for getting challenging deals done, deals that may need a story or additional financials. Or sometimes brokers work with multiple different lenders to be able to get the total amount that you need to finance your x-ray equipment.
Sometimes the rates provided by brokers can be somewhat aggressive if they're working with banks. Sometimes they are more expensive, or the rates are higher, if they're working with independent leasing companies.
Typically, brokers make their money by building in points. So by going out and doing the hard work of finding some of those more challenging loans, or borrowers that have more challenges to getting financed, that's how they make their money. If you work with a broker, expect that there will be points built into the agreement.
What to look out for when financing or leasing x-ray equipment
When leasing your x-ray equipment, you need to be wary as it is a very unregulated industry. There are some tricks out there that lenders will use to make more commissions or more money on a financing deal. Below are some of the things you want to look out for when leasing x-ray equipment, no matter who you're working with.
Vague end of lease term option
A vague end of lease term option means that in the agreement that you sign, it might not give specifications as to what happens at the end of lease term. For example, you might reach the end of the agreed 72 month lease term, but unless you reach out to the lender they may continue to charge you the same monthly payment.
There are also times where someone may think that they are in a one dollar buyout lease, but they are actually in a fair market value lease. So it is important to make sure that you understand what the end of lease term options are and that it is properly documented.
There is a perception that 0% financing is great, however, you will end up paying one way or another. How does that work? The equipment provider, or the vendor that you're working with, is likely increasing the price of their product to be able to offer it with padding to pay for the financing. So the x-ray equipment provider, or vendor, is actually paying for the interest rate but making it look and feel like it is 0% financing.
Hidden fees or unspecified fees
Often lenders may try to hide fees, like a documentation or filing fee, which can all add up. Sometimes those fees are negotiable, particularly if you have great credit and if you are working with banks.
The advance fee scam
The advance fee scam is where before you even get approved, you find a broker or someone who is going to help you get financing. This person requests a fee in advance to make sure that you get approved to finance your x-ray equipment. In some cases this fee doesn't get applied to your loan as a future payment, meaning it is just a fee to get you into a potential approval. In some cases, if you don't get approved, they will still keep that advance fee.
There's lots of options out there when you are looking for financing. The advance fee scam is definitely one to avoid because it's unnecessary. You can definitely find a good loan or lease without having to pay an advance fee.
Bait and switch
Often a lender will talk about a one dollar buyout, but then once the documents come they are for a FMV lease, or at least have a very vague end of term conditions where you are going to have to keep paying that recurring monthly fee. This is similar to a change in contract. So make sure that before you sign the dotted line, even if you had read the contract once and it comes back again for signing, make sure to always reread it. There have been many cases where conditions that are not in the best interest of the borrower get put into contracts as changes.
FAQs about financing x-ray equipment
What is the rate?
The rate will be dependent on the borrower's credit. Additionally, business is also going to greatly affect the rate and the approval. Typically, the best programs require you to be in business for at least three years, and have at least a 700 FICO score or better. In the medical space, there are a lot of lenders that will calculate your time in business based on the number of years you have had your license.
For example, if you have been licensed as a chiropractor or an MD for three years and you are starting up a new practice. The lenders still might consider you, potentially as a non-startup, which will get you approved for better programs.
Can I pay off early, or if there is a prepayment penalty?
Most lenders will say absolutely, you can always pay off early, but the real question you want to ask is; can I pay the principal off early? With a lease or a loan, all lenders will allow you to pay the remaining payments at any time. However, those payments have interest included. So you always want to ask, can I pay off the principal at any time?
If there is any type of prepayment penalty, a lot of lenders will require that you have a loan for at least a year, or sometimes it's half the term that you're allowed to pay without any penalty. So that's definitely something to look for and to make sure you ask those questions when looking for and applying for financing.
Financing a digital x-ray system can be challenging because there are so many options. Take the time to understand what you're getting into and ask all of the right questions before signing anything.
At Maven Imaging, we have our own in-house financing where we work with a number of different lenders. We have programs that are catered for specific credit needs, industries, as well as startups and established businesses. We'll work with you to find an option that best fits your needs.
We've provided some helpful information that should help you get started, if you would like more assistance, let us know. Our team is here for your every step of the way to take care of financing or leasing a digital x-ray system in 2022.