Medical Financing and Commercial Mortgages

Medical financing continues to enjoy the best loan options in the business. Lenders continue to “salivate” over doctors, dentist, and veterinarians. For example, 90% financing on purchases or construction transactions still exists.

A lot of borrowers are surprised to hear this, especially in regards to construction financing, as most banks are currently no longer considering construction loans. However, there still are a hand full of national, non depository banks and lenders that continue to lend.

One of the interesting things about both purchase or construction financing for medical practitioners is the ability to roll in other non real estate components into the loan. For example, say you where considering purchasing an office condo, which only currently had the outer shell complete. The cost to build out of the space can easily be included. In addition, cost of medical equipment can be rolled into and often amortized over a 25 year schedule, unlike most equipment lenders that normally only offer 5 – 7 year schedules. Also lines of credit/working capital can be factored in, beyond the value of the real estate.

Medical Financing

We are currently working with a doctor in Georgia, on a ground up construction project which is a very good example of this. He purchased the land for $300,000 and the cost for construction is $500,000. For most non medical borrowers they would only be able to have the 80% of the $800,000 financed. However with this doctor, he added $150,000 of equipment and a $250,000 line of credit. He received 90% financing of the $950,000 and still had the line of top of that… With this particular lender they will go up to 133% of the real estate/equipment value (only for medical financing transactions).

Medical practitioners should take some time or work with a seasoned third party provider to produce options beyond what the local banks provide. There can be huge differences, again like higher leverage, longer fixed rates (like 10 years) and amortization schedules to 30 years. As a comparison, most local banks only offer 20 year amortization schedules with 5 year fixed rates, and they expect side business, like your checking, saving, etc if you work with them.

Picking a Best in Class Finance Partner

WHY OFFER SOFTWARE LEASING & FINANCING

Increase your sales

Shorten your sales cycle

Increase your margins

Increase revenue recognition

Receive payment faster

Make your sales people more effective

Eliminate capital budget delays

Overcome cost objections

Build repeat business

Key Equipment Finance offers innovative and strategic vendor leasing programs for businesses. Our vendor leasing programs will give you the ability to now offer your customers the equipment leasing option for your product.

Vendor Lease Program:

Custom Lease Structure: Our leasing professionals will work closely with your staff to design a program that will provide the leasing alternative for your products.

Sales Training: We offer a lease orientation program for your sales team to show the competitive advantage of leasing vs. purchase.

Lease Rates: Lease rates are continuously updated and will be distributed to your sales team quarterly via e-mail.

Lease Quotation Preparation:We will prepare lease quotations within 24 hours. We will also assist your sales team to provide quotes directly.

Credit Review: Credit reviews are completed within 2 – 4 hours. Leases are non-recourse to you, unless otherwise agreed by you in advance.

Documentation: We prepare, and execute all lease documents. The Master Lease is executed once, and any additional needs simply require a one page Lease Schedule.

Invoice Payment: Invoices are paid within 1 business days of receipt of notice of equipment delivery and acceptance.

Process:

Issue Lease Quote: A lease quote is issued in accordance with the sales quotation.
Submit Credit Application: The customer completes and returns the lease application and financial information for credit review. Key Equipment Finance renders a credit decision within 2 – 4 hours of receipt
Prepare, Forward and Recover Documents: Upon credit approval, lease documents are prepared and forwarded to the customer for signature.

Issue Purchase Offer: Upon receipt of properly executed

documents,Key Equipment Finance issues its purchase order for the products and services to be leased.

Invoice Payment: Upon advice of installation and acceptance, invoices are processed for payment within 1 days of receipt.

Vendors understand the importance of a total solutions sale that includes financing for building repeat equipment sales.

End-users realize many benefits from leasing their equipment but manufacturers and vendors benefit too.

Total Solution Sale

Being able to offer your customer a total solution your equipment and a way to acquire it means you have greater control of the sale. No delays while your customer is trying to arrange financing. Reduce chance your customer will look for alternate equipment solutions.

Easy Upgrades During the Lease; Ideal Position for the Next Sale

When you control your customers financing, you can build-in options for technology upgrades or add-on during the lease and, most importantly, you have a built-in advantage for rolling-over financing of your next generation equipment to your customer.

Larger Ticket Sales

Selling a monthly payment amount that can be designed to fit your customers budget helps you sell additional features that your customer might need, which makes your sale larger.

Your Paid up Front

No accounts receivable problems. You get a check for 100% as soon as the equipment is installed, and installation is verified by your customer.

Makes Closing Simpler

“You can lease this equipment with an option to own. Its 100% financing; 100% deductible with the option to own – at $xx per month over 36 months, or $xx per month over 48 months Which plan is best for your budget?

Helps Close the Sale Now

Leasing gives you the ability to show your customers how to get the equipment they need, when they need it allows you to work within their budget cycles.

Competition

Your competition offers lease finance solutions. So can you.

Commercial Financing – The Benefits of Off-Balance-Sheet Financing

There are two different categories of commercial financing from an accounting perspective: on-balance-sheet financing and off-balance-sheet financing. Understanding the difference can be critical to obtaining the right type of commercial financing for your company.

Put simply, on-balance-sheet financing is commercial financing in which capital expenditures appear as a liability on a company’s balance sheet. Commercial loans are the most common example: Typically, a company will leverage an asset (such as accounts receivable) in order to borrow money from a bank, thus creating a liability (i.e., the outstanding loan) that must be reported as such on the balance sheet.

With off-balance-sheet financing, however, liabilities do not have to be reported because no debt or equity is created. The most common form of off-balance-sheet financing is an operating lease, in which the company makes a small down payment upfront and then monthly lease payments. When the lease term is up, the company can usually buy the asset for a minimal amount (often just one dollar).

The key difference is that with an operating lease, the asset stays on the lessor’s balance sheet. The lessee only reports the expense associated with the use of the asset (i.e., the rental payments), not the cost of the asset itself.

Why Does It Matter?

This might sound like technical accounting-speak that only a CPA could appreciate. In the continuing tight credit environment, however, off-balance-sheet financing can offer significant benefits to any size company, from large multi-nationals to mom-and-pops.

These benefits arise from the fact that off-balance-sheet financing creates liquidity for a business while avoiding leverage, thus improving the overall financial picture of the company. This can help companies keep their debt-to-equity ratio low: If a company is already leveraged, additional debt might trip a covenant to an existing loan.

The trade-off is that off-balance-sheet financing is usually more expensive than traditional on-balance-sheet loans. Business owners should work closely with their CPAs to determine whether the benefits of off-balance-sheet financing outweigh the costs in their specific situation.

Other Types of Off-Balance-Sheet Financing

An increasingly popular type of off-balance-sheet financing today is what’s known as a sale/leaseback. Here, a business sells property it owns and then immediately leases it back from the new owner. It can be used with virtually any type of fixed asset, including commercial real estate, equipment and commercial vehicles and aircraft, to name a few.

A sale/leaseback can increase a company’s financial flexibility and may provide a large lump sum of cash by freeing up the equity in the asset. This cash can then be poured back into the business to support growth, pay down debt, acquire another business, or meet working capital needs.

Factoring is another type of off-balance-sheet financing. Here, a business sells its outstanding accounts receivable to a commercial finance company, or “factor.” Typically, the factor will advance the business between 70 and 90 percent of the value of the receivable at the time of purchase; the balance, less the factoring fee, is released when the invoice is collected.

Like with an operating lease, no debt is created with factoring, thus enabling companies to create liquidity while avoiding additional leverage. The same kinds of off-balance-sheet benefits occur in both factoring arrangements and operating leases.

Keep in mind that strict accounting rules must be followed when it comes to properly distinguishing between on-balance-sheet and off-balance-sheet financing, so you should work closely with your CPA in this regard. But with the continued uncertainty surrounding the economy and credit markets, it’s worth looking into the potential benefits of off-balance-sheet financing for your company.