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Medical Equipment Loans

By Elise Moores Managing Editor at Fast Capital 360 Reviewed By Mike Lucas Updated on May 04, 2021

Few industries are as reliant on having updated equipment as the medical field. State-of-the-art equipment not only provides patient comfort and accurate readings, but it also draws new clients while keeping those you have satisfied.

That said, many small business owners in the medical field may not have the working capital to buy new tools and machines. A medical equipment loan offers a solution to this problem.

Let’s go over how medical equipment financing works, how much it can cost and how to apply.

How Does Medical Equipment Financing Work?

Medical equipment financing provides loans for medical professionals such as doctors, surgeons, dentists and specialists when they can’t afford to buy necessary equipment outright.

A medical equipment finance company gives you a sum of money to buy the equipment — and you’re required to pay it back with regular installments.

Equipment financing is secured: When you buy medical equipment, the product itself acts as loan collateral. Depending on the type and condition of the equipment, you can receive up to 100% of the value in funding. This makes it possible to get a medical equipment loan with little or no down payment.

Do you need a loan for your small business?

Medical Equipment Loan FAQ

Here are some frequently asked questions regarding medical equipment financing.

What Type of Medical Equipment Can I Finance?

You may be wondering if the type of tools or machinery you need can be purchased with medical equipment financing. Good news: Most common medical devices are eligible.

If you are unable to buy equipment outright, turn to medical equipment finance companies.

A medical equipment loan can be used to acquire:

  • X-ray and other imaging equipment
  • Diagnostic equipment
  • Dental instruments
  • Hospital beds and examination tables
  • Optometry equipment
  • Dermatology equipment
  • Chiropractic equipment
  • Surgical equipment

Dentists use medical equipment loans to buy imaging machines and other tools.

Can I Get a Loan to Buy Used Medical Equipment?

Many lenders provide loans for medical professionals looking to buy used medical equipment. Indeed, there’s a market for used equipment. (After all, medical machines and devices are expensive.)

Qualifying for funds to buy used medical equipment can be a bit trickier than other financings. The type and condition of the equipment will dictate the down payment, interest rate and repayment terms.

Why? The medical equipment finance company needs to ensure it can make money off the collateral in case of default. Because medical equipment tends to have a short life, lenders must consider when machines and devices will lose their value.

For example, a piece of imaging equipment might become outdated after 10 years. If you want to purchase one that’s 7 years old, your down payment may go up, and your repayment term may be shorter than if the machine was 3 years old. Once equipment becomes outdated, the lender can’t make any money off it if they have to repossess and sell it.

Can I Get a Medical Equipment Leasing Loan?

There are a couple of options available for medical equipment leasing.

Your first option is to lease the medical equipment outright. Doing so involves essentially renting it for a specified period. At this time, the leasing company (usually the manufacturer or a bank it’s partnered with) retains ownership and can sell the used equipment to another business.

This is a good option for medical professionals who regularly update their equipment but it might not work for those with smaller budgets.

The other option for medical equipment leasing can be trickier. Some manufacturers and lenders offer lease-to-own agreements. These pacts are like regular leases but give you the chance to buy the medical equipment before the lease is over.

Leasing to own can work if you’re unsure whether you want to commit long-term or need lower payments until you begin to make more money.


Types of Medical Equipment Loans

There are a few different types of medical equipment loans for doctors and other healthcare professionals. Your choices will be determined by your personal and business credit score, the equipment you’re buying and other factors.

Equipment Financing

Equipment financing is the default choice for those buying medical equipment. This financing solution is tailored for tools and devices, and some lenders specialize in these loans exclusively.

Equipment financing rates will vary by lender. Repayment terms from healthcare equipment financing companies or other lenders can fall between 1-5 years. Longer terms give you lower monthly payments but can raise the risk for lenders in case of default.

Your terms will be based on your credit history and the useful life of the equipment you’re buying.

Term Loans

You can use conventional term loans from lenders in place of specialized equipment-financing programs.

Banks often provide loans with longer terms for fixed assets that hold their value, like real estate. Such agreements can extend to 25 years. However, medical equipment financing through term loans is considerably shorter. Many equipment term loans reach maturity in 10 years or less.

If you can secure a longer-term loan, your medical equipment loan interest rates might be lower than other options.

Short-Term Loans

A short-term loan may be an option for businesses that want to buy used medical equipment or low-value items, like small dental instruments.

Repayment terms for these loans are generally less than 3 years. Depending on the type of financing you pursue, terms could be as short as 3 months.

Short-term loans are also an option for businesses with credit scores that disqualify them for long-term financing.

SBA Loans

Guaranteed in part by the Small Business Administration (SBA), certain SBA loans can be used as medical equipment financing.

The maximum maturity for SBA loans used to finance equipment is 10 years. Interest rates are subject to SBA maximums, making this financing one of the most affordable options available to small business owners. The application and underwriting process is lengthy; it can take months to receive funding through SBA programs.

If you need to buy your medical equipment immediately, you might have to look into alternative small business funding options.

Business Line of Credit

A business line of credit is a mix between a high-limit business credit card and a term loan.

When you secure a business line of credit, you’re given a funding limit based on your creditworthiness. Once you withdraw money, you pay regular installments until the amount is paid in full. As soon as it’s paid off, you can withdraw funding again from your credit as needed.

This is a great alternative to a medical equipment loan if you need to upgrade equipment consistently.

Merchant Cash Advance

Another medical equipment financing option is a merchant cash advance (MCA).

An MCA works a bit differently from a loan against medical equipment. Instead of paying the cash back with monthly installments with interest, MCAs use factor rates to determine a set amount you must pay. Payments are taken from a percentage of your credit-card transactions, or ACH payments are withdrawn directly from your business bank account.

MCAs are an alternative to loans for medical professionals with bad credit or those who need money fast. Many alternative lenders, including Fast Capital 360’s partners, can issue a funding decision within hours and deposit capital into your business bank account within 24 hours of approval.

Medical equipment loan interest rates can vary based on your practice.


Medical Equipment Loan Interest Rates

Your medical equipment loan’s interest rate will vary based on many factors.

Loan Type

The first factor that determines your interest rate is the type of loan you apply for. Remember, a business owner might not qualify for certain loans because of:

  • Low credit scores
  • Low revenue
  • Having been in business for a short time

Here are some common starting points for interest rates on various options through Fast Capital 360’s lending partners:

Financing TypeInterest Rates Starting at ...
Equipment Financing8%
Term Loan7%
Short-Term Loan10%
SBA Loan6.25%
Business Line of Credit8%
Merchant Cash Advance1.10 (factor rate)

Creditworthiness

Low credit scores not only disqualify small business owners from certain lenders and financing types, but they will raise your interest rate as well.

While you can still get medical equipment loans with bad credit, your interest rate might exceed 10% or more than 20%.

How Much Can My Business Qualify For?

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Time in Business

How long your business has been in operation also plays a role in your interest rate. The younger your company is, the riskier it is to lenders.

Seeking funding as a startup could mean steep interest rates or disqualification from certain programs altogether. Most healthcare equipment financing companies require your business to be at least 2 years old.

If you haven’t met that requirement yet, you might consider alternative funding options, such as MCAs, which require companies to be in business for at least 6 months.

Revenue

Your annual revenue impacts financing eligibility. 

To qualify for equipment financing through Fast Capital 360’s lender network, an applicant must generate a minimum of $160k in annual revenue.

However, the revenue thresholds set for other financing programs are far lower. For instance, to qualify for an MCA, a business must generate $100k in annual revenue.

Still unsure about taking a loan against medical equipment? Check out our equipment financing calculator to learn more and estimate your cost of borrowing.


Applying for Medical Equipment Financing

The process of applying for medical equipment financing is similar to most small business funding. First, you’ll need to compile the necessary information.

Have the following financial details on hand:

  • Bank statements
  • Tax returns
  • Balance sheets
  • Profit and loss statements

Small business tip:

Some medical equipment finance companies may ask to see more financial information to assess your application. Always have up-to-date financial reports on hand to ensure your application can be processed quickly.

Once you have those documents ready, you’ll have to provide more basic information, including information about you and your practice.

Once your financial data is verified, the lender will decide whether to approve your application.

Depending on the type of financing and lender you choose, the time it takes to secure funding can vary. If you apply for a medical equipment loan through an online lending marketplace, such as Fast Capital 360, you can receive funding in as little as 2 days.

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