As Calgary continues to rapidly urbanize and grow in population, so does the demand for condo-style residences.
Despite impending interest rate hikes and subsequent fears of a housing market crash, condo complexes are still being built and equipment financing is making more and more sense.
Lately we’ve been financing more equipment for condominium corporations, and here’s why. Whether they need a new boiler, fitness equipment or a security system, a condo complex will often need critical equipment immediately.
More and more condominium corporations are leasing, especially when dealing with major emergency purchases
OK. Maybe a treadmill or elliptical doesn’t qualify as “critical” but there is some urgency when the boiler goes in December, or the tenants cars are constantly being vandalized due to poor security.
So here’s the thing. When the time comes to replace features that are common elements, the reserve fund can be used. But boards cannot refuse to fix the damage because “there is no money.” Rather, the board has to raise fees, do a special assessment, or take a loan to top up the reserve fund. They can save for years to be able to afford to pay cash for the new boiler or security system. OR, they can get it right now and start making lease payments.
Leasing lets condos avoid big upfront costs
With leasing, you don’t have the big upfront costs you’d face if you purchased the equipment outright or the deposit for a loan.
You generally just have a flat monthly payment over the lease term, with the first payment needed to start the lease. And here’s another thought to consider …. With a lease, everyone shares in the payment, and everyone enjoys the benefits. And once the equipment is paid off the condo association may elect to continue collecting the same condo fee. That additional income now goes into the associations’ coffers for the next emergency or opportunity. No special assessments needed!
Sounds like a savvy win for condo boards and condo owners alike!
In their e-commerce newsletter last week, the Calgary Chamber of Commerce presented a graph that showed Alberta has the second lowest rate for “minimum wage” in the country.
But a second graph showed that because we enjoy a “low tax environment” we actually have the second HIGHEST minimum wage rate in the country.
Would you believe that rates for leasing equipment can trick you in the same way?
Often when people think “leasing” they think high interest rate. Yes, lease rates will normally be higher than a bank loan, but because your accountant can write 100% of that lease payment off against your corporate taxes, you get to re-coup a sizeable part of that expense.
There can be a different outcome when you shift the challenge and see it from a different perspective. The overall cost should be the deciding factor.
Much like the ‘appearance’ of varying minimum wages across the country, the actually amount of money that ends up in your pocket is really what counts.
Starting a new clinic can require a significant investment in medical and therapeutic equipment, not to mention office furnishings and other supplies.
Medical and health related technology is constantly evolving, inevitably becoming more accurate, safer and effective.
In this new world, Canada’s public healthcare system and private health clinics are turning to leasing their equipment as a way of lowering overall costs, freeing up cash flow and more importantly, providing the most up to date patient care.
Over the years we have financed all types of equipment for health practitioners. In some cases it started out with one piece of equipment and as the medical professional began to understand the benefits of leasing, they came back to us to finance additional equipment and even their medical supplies.
We can even finance management software for physiotherapists chiropractors and laser therapy technicians.
One of the benefits they enjoy the most is that leasing allows them greater flexibility to keep their equipment up to date.
How does that work? Well, when the lease term is over, they simply acquire the latest model and maintain their lease payments at about the same level. So if, for instance, we finance laser therapy equipment for a medical clinic, after a three year lease the older laser technology may soon be out of date. If the clinic purchased the equipment with cash and they now want to buy more state-of-the-art equipment, they will have to find a buyer for the old equipment, trade it in or send it to the scrap heap. Either way, they have to deal with another large cash outlay which may put pressure on their time, cash flow and lines of credit.
When they lease their equipment, they can choose to buy it out, usually at a very low price, or return the equipment and replace it with a brand new state-of-the-art laser equipment. Typically, end of lease buyouts are 10% of the original purchase price.
Using the latest technology will not only make them more efficient, it will also help build the patient’s perception of their clinic as being more modern and preferable to competitive options. This perception also attracts highly skilled technicians who prefer state of the art equipment.
There is no limit to the types of equipment that medical and health practitioners can lease. The list can include:
Chiropractic Tables and Equipment
Physiotherapy Equipment
Laser Therapy Equipment
Therapeutic Massage tables
Dental Equipment
MRI Equipment
CT Scanners
X-ray Machines
On top of all that, the clinic writes off 100% of the lease payments, instead of calculating and writing off only the depreciation amount on the equipment at the end of every year. This is one of the main reasons we recommend clinics and practitioners should lease depreciating equipment and only pay cash for appreciating equipment.
Medical and health practitioners should lease depreciating equipment and only pay cash for appreciating equipment
Here is a list of 7 reasons why in most cases you’ll be better off leasing medical equipment rather than buying.
Your bank will require a 10 – 20% down-payment on a loan, while a Lease can be done with only one monthly payment in advance.
Leasing allows you to more easily upgrade your equipment, giving your patients access to the latest in technology which provides you with efficiencies and a competitive advantage.
Leasing improves your asset management and frees up capital for other expenditures.
You can plan for the future because your lease payments are fixed and won’t fluctuate with rising interest rates.
With leasing, you avoid obsolescence because you simply upgrade to the next model at the end of your lease.
Leasing provides flexible payment options and oftentimes no down payment is required. With leasing, you can secure one hundred percent financing, which means the hardware, software, training, maintenance, shipping and installation can all be included in your lease agreement. We’ll even finance 100% of your Medical Practice Management Software.
Leasing provides tax benefits as you may be able to write off 100% of your lease payments.
With benefits like these, it’s easy to understand why Canada’s healthcare system and especially private health clinics of all kinds are turning to leasing.
Given the rate that equipment technology is advancing, and becoming safer and more effective, leasing makes a lot of sense for your clinic if you believe it’s important to use the latest technology and maximize your cash flow.
If you are starting or currently operate a clinic contact us to determine if leasing make sense for your specific situation.
Despite impending interest rate hikes and subsequent fears of a housing market crash, condo complexes are still being built and equipment financing is making more and more sense.
