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Medical Equipment Loans

By Elise Moores Managing Editor at Fast Capital 360 Reviewed By Mike Lucas

Few industries are as reliant on having updated equipment as the medical field. State-of-the-art equipment provides patient comfort and accurate readings and 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.

Related: Where to Find Working Capital Loans Options for Small Business Needs


What Is a Medical Equipment Loan?

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

There are several types of financing — from term loans to equipment financing and Small Business Administration-backed loans — that can help you purchase medical equipment for your business.

How Does Medical Equipment Financing Work?

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 Medical Equipment Loan for Your Small Business?

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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

Diagnostic equipment makes up the biggest share of the medical equipment financing market.

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 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 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 equipment outright. Doing so involves essentially renting it for a specified period. At this time, the healthcare equipment leasing companies (usually the manufacturers or a bank they partnered with) retain ownership and 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 is lease-to-own agreements. These pacts are like regular leases but give you the chance to buy the 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. Available options 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.

Apply now

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 fewer.

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

Apply now

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 2 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.

Apply now

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.

Apply now

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 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.

Apply now

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.

Apply now

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 Type Interest Rates Starting at …
Equipment Financing 8%
Term Loan 7%
Short-Term Loan 10%
SBA Loan 6.25%
Business Line of Credit 8%
Merchant Cash Advance 1.10 (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 4 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 $160,000 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 $100,000 in annual revenue.

  • Still unsure about hospital or other medical equipment financing? 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.

1. Compile Necessary Information

Before you complete your application, make sure you have the following financial documents and other relevant information on hand:

  • At least 6 months of bank statements
  • Tax returns
  • Balance sheets
  • Profit and loss statements
  • Your personal information and any partners or co-owners of the business
  • Personal and business credit scores
  • Doing-business-as (DBA) name, if applicable
  • Articles of organization or incorporation
  • Investment information, if applicable

  • 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 quickly processed.

    Related: 8 Steps on How to Get a Business Loan

2. Complete the Application

You’ll use your personal and business information to fill out your application and attach copies of any relevant documents (e.g., bank statements). 

If you apply to a conventional lender, such as a bank or credit union, check with a representative about how they’ll receive your paperwork. You might be asked to share documents online or submit them in person. If you work with an alternative lender, such as Fast Capital 360, the entire application and data upload process takes place entirely online and takes only minutes.

3. Vetting and Approval Process

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. Conventional lenders can take several weeks to more than a month to review your application before granting approval. This process can include virtual or in-person meetings and potentially an on-site visit to your business. 

Alternative lenders’ streamlined applications help them process funding requests much more quickly, and you could receive an approval within days. Some financing options can even be funded on the same day you’re approved.

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