Guest blog by Nancy Maynard of First American Dental Finance
Considering investing in technology and infrastructure ahead of growth? Making decisions early and having established systems in place can provide a solid foundation for scaling your business.
Dental support organizations (DSOs) and group practice should consider the technology and infrastructure equipment needed to bring them into the future, as well as software and security. Using cash is often perceived as the fastest and easiest way to fund these projects – but it could also be the costliest. How else could you use that money? Will a strain on working capital affect operations? Is this the best strategy for assets with a short useful life?
With these concerns in mind, it is wise to consider how leasing may benefit your business as you prepare for growth:
- Achieve Beneficial Tax Treatment – True Leases are treated as rental payments by the IRS and expensed monthly on your Profit & Loss statement. Since expenses reduce net income, this can decrease your company’s tax obligation.
- Pay Less – Use a Fair Market Value lease structure to acquire new equipment and technology for less than paying outright. The sum of monthly lease payments can equal less than the upfront cash price.
- Refresh Technology – Keeping equipment on a structured renewal cycle manages obsolescence. The discipline to refresh regularly reduces down time and saves money spent on service costs.
- Spread Out Payments – Paying over time conserves cash and daily working capital. Considering the time value of money, holding on to your cash for longer further enhances the benefit of paying for a piece of equipment over time.
- Share Expense Among Partners – Entities with multiple owners deal with the challenge of partners buying in and out. Leasing equipment and expensing rental payments supports a pay-for-use model so partners only pay for use of the equipment for the time they are involved in the partnership.
- Minimize Risk – End of term options allow you to enjoy ultimate flexibility. You hear time and time again from industry pioneers the mistakes that were made along the way in terms of committing to technology hardware and software that ultimately was not the right fit. When scaling your organization, why purchase equipment via loan or cash when you can rent and at the end of term have options to (1) continue renting, (2) purchase at Fair Market Value (which can be fixed upfront to rid ambiguity), or (3) return individual or all pieces of equipment.
The pace of change in the dental industry is faster than ever. Keeping your business nimble as you build a solid foundation for growth will position your organization to stay ahead of the curve.
Each project is unique. Exploring and understanding your funding options can help you choose the ideal solution for your needs. For more information on leasing and financing, visit:www.FADentalFinance.com
Nancy Maynard is a Certified Leasing and Finance Professional who brings 13+ years of banking and finance experience to the First American team, working with dental organizations throughout the United States to offer equipment leasing and office expansion financing