Today's Veterinary Business

JUN 2018

Today’s Veterinary Business provides information and resources designed to help veterinarians and office management improve the financial performance of their practices, allowing them to increase the level of patient care and client service.

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14 Today's Veterinary Business Business For too many practices, howev- er, the homework ends there. What veterinarians, practice managers and other procurement people aren't always as knowledgeable about are the financing options that will help make the best deci- sion in support of the bottom line. Flush with Cash? Borrowing money to buy equip- ment is understandable if you don't have a large cash reserve. But what if you can pay in full? Obviously, you'll avoid the costs associated with a loan, but that might not be your best strategy. Although loan payments are not tax deductible, depreciation and in- terest often are. Accelerated depreci- ation methods, such as Section 179, allow you to take up to 100 percent of the depreciation in the year you purchase the equipment. And there's something to be said about keeping the cash stash intact in case of an emergency or investment opportunity. Before de- ciding, ask your accountant about cash-flow considerations and whether deductions might prove beneficial for your practice. When Is a Lease Not a Lease? When it comes to financing an equipment purchase, it is important to first understand the terminology. Traditional lenders in the equipment arena often use the term "lease" instead of "loan." However, this doesn't mean you rent the equip- ment for a designated period and never take ownership, which is known as an operating lease. Rather, they are referring to a finance, or capital, lease. "These leases re- quire no money down, which enables prac- tices to immediately get a return on their investment," said Scott Preiser, general manager of equip- ment finance at Live Oak Bank. "Seventy-five percent of all our business is through these capital and support each lender offers, as well as its longevity and reputation. Consult other practices, trade asso- ciations and professional organiza- tions about their experiences. Consider asking these questions of your prospective lender: • How long have you been working in the veterinary industry? • What veterinary expertise does your organization bring to the table? • Why should I work with you instead of another lender? • How can you support my practice's needs beyond this purchase? • Can you also address my per- sonal banking needs to allow for one-stop shopping? Digging Deeper George Bednar, vice president and director of sales at Beneficial Equip- ment Finance Corp., has worked over 30 years in the equipment finance industry, nearly half of that in the veterinary market. "I've directly or indirectly done business with 35 to 40 percent of practices," Bednar said. He suggested some important but not-so-obvious questions that equipment purchasers should ask their prospective lenders. Is your funding source a direct lender? A direct lender, as opposed to a broker, lends its own money direct- ly to the practice. Direct lenders can prove advantageous because most are well-regarded by the in- dustry they serve and are regulated at the national and state level. This one-stop shopping may save you time and money as well. Brokers can shop for more loan options, which may prove benefi- cial if your financial standing isn't strong. Be mindful of extra fees the broker might charge, though. What fees might be incurred under various scenarios? At some point, you may find it in the practice's best interest to pay off the loan early. Some lending ar- Any successful veterinary practice needs the right equipment in place, whether that means outfitting a start-up operation, adding a surgical suite or simply replacing a tired X-ray machine with a state-of-the-art model. Researching all the particulars can become a lengthy process as team members make sure they select the right piece of equipment for the right job at the right time. leases, which have a $1 purchase option at the end of the lease. The bank purchases the equip- ment and holds the title until the lease ends and the dollar is paid. Equipment finance agreements are essentially the same as capital leases but have additional liability protection for the lessor. Choosing the Best Partner An equipment sales represen - tative no doubt will have recommenda- tions for lenders found to be reputable and reliable. (Your options might be limited if you are purchasing used or highly specialized equipment). If you've already es- tablished a positive re- lationship with a lender, don't hesitate to insist on partnering with them again. But if this is your first foray into lending, look beyond the interest rate offered and take a close look at the services By Vera Wilson Business BANKING Borrowing money for an equipment purchase requires doing a bit of research to find the right lending partner. 1 2 It's prudent to do your own review before you apply to ensure approval and the best possible terms. Cash or credit?

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