Five Big Reasons Your Medical-Equipment Customers Want You to Provide Financing
According to a new report by Fortune Business Insights, the market for healthcare equipment financing is booming — and expected to stay strong through the decade, reaching $210.5 billion by 2027. That’s up from $102.3 billion in 2019, representing a compound annual growth rate of 9.5% for the years 2020 through 2026.
In response, strategic-minded healthcare equipment makers are working to make sure they can accommodate this pipeline. It seems most efficient for some of these companies to outsource the entire financing piece to an outside lender — often part of a bank of a standalone financier that specializes in equipment financing. Increasingly, however, “more of these players are opting to provide financing in-house using lending technology that’s simple on the front end but backed by the latest in artificial intelligence and machine learning,” says Elena Ionenko, co-founder and operations chief of TurnKey Lender, a leading lending-software maker.
Meanwhile, in its “Q2 2021 Equipment Leasing & Finance Industry Snapshot,” the Equipment Leasing & Finance Foundation bolsters Fortune Business Insights’ buoyant view. Spurred by stimulus payments, record-high savings, and, above all, the prospect of economies around the world opening back up as Covid-19 becomes less of a threat, the Foundation sees the US economy growing by 5.7% in 2021 for the most dramatic yearly GDP rise since 1984.
Learn about TurnKey Lender’s Equipment Financing software and become a lender for your organization with record-breaking time-to-market.
Confidence at an all-time high among equipment financiers
In fact, in the medical-gear space, equipment financiers, like Charter Capital, Bankers Healthcare, and Providence Capital, have never felt more confident about prevailing and future business conditions. Overall in April 2021, confidence in the equipment finance market rated a score on the Foundation’s confidence index of 76.1, an all-time high, and an increase from the March index score of 67.7. The latest monthly confidence report, published by the Equipment Leasing & Finance Foundation, found that:
- 73.3% of respondents (top equipment-financing executives) believe business conditions will improve over the next four months, up from 50% in March
- 70% believe demand for leases and loans to fund capital expenditures will increase over the next four months, up from 42.9% in March
- 80% evaluate the current U.S. economy as “fair” (up from 78.6% in March), 13.3% rate it as “excellent” (up from 3.6% in March), and only 6.7% thought it “poor” (down from 17.9% in March)
In 2020, medical equipment accounted for just 4.4% of equipment financing — well below transportation (24.4%), IT (23.0%), and construction (13.6%), but ahead of materials handling (3.7%), energy (1.8%), and furniture (1.6%), according to the ELFA.
But healthcare equipment financing is expected to surge, as medical-gear makers scramble to:
- Satisfy demand thwarted during the darkest days of the coronavirus pandemic
- Handle rising organic demand, especially in emerging economies
- Leverage technology to help customers protect cash reserves after the economic shocks of the pandemic
Bottom line, healthcare practices of all sizes and types — from sole-practitioner orthodontists to big hospitals and national treatment centers — finance their equipment.
Industry expert’s five top benefits of tech-enabled financing
While 8every healthcare organization is different, five benefits of providing financing services stand out to TurnKey Lender’s Ionenko as especially compelling to the medical businesses your company serves.
1.Control over cash flow
100% financing with no down payments can take pressure off when cash flow is an issue — either due to liquidity constraints or to have liquid cash on hand for improvements, marketing, R&D, or in anticipation of seasonal constraints on business.
2. Enhanced risk management
Financing can lead to better risk management. By financing their equipment, practices can dilute the risk of paying for equipment before it pays for itself — “a risk financing obviously mitigates,” says Ionenko.
3. The equipment you really need
Financing can open the door to the latest and best medical equipment on the market. Equipment providers can even design financing programs that include upgrades, patches, or replacements.
4. Expert support
When you buy a piece of medical equipment outright, your healthcare business could be on its own from the moment it arrives on site. On the other hand, if you finance with a smart medical-equipment financier then “your company gains a deeply knowledgeable partner, helping your business with set-up, troubleshooting, and best practices,” according to Ionenko.
5. Line-item clarity
Some financing arrangements let customers finance the all-in cost of equipment (installation, maintenance, training, and software charges), giving them a flexible and efficient solution as an unambiguous budget item.
“The big point here is that, as a healthcare-equipment maker, equipment financing probably isn’t your specialty,” says Ionenko. “But it’s our specialty, and the benefits and convenience of what we bring to the table as a result of this specialization drive tangible benefits to healthcare equipment suppliers and the healthcare practices they support.”
Ensure repeat business in a secure and flexible environment
The best in-house, tech-enabled financing systems are built to be flexible and provide scale. They can easily deal with high volumes and quickly adjust for the specific (and sometimes changing) needs of businesses whether they are relatively simple or inherently complex.
But you don’t want to paint all providers of tech-enabled in-house financing with the same brush. Here are other things to look for when assessing financing technology are the following, according to Ionenko.
- Credit “decisioning” that’s driven by advanced AI and proprietary algorithms for flexibility in your company’s financing criteria
- White-labeling – all mention of the underlying tech vendor is removable to highlight only your own brand
- “Modular” structure that encourages you to use (and pay) only for the functionalities you need to serve your customers
- Finding a software partner with auditors on staff for troubleshooting and ongoing backup “is cyber-security best practice that many equipment suppliers overlook,” says Ionenko.
“The way we see it, providing financing services to the businesses that buy your medical equipment is a way to drive more business,” adds Ionenko. “And for many healthcare-equipment makers, the fastest and easiest way to do that is through technology rather than a third-party lender.”
Learn more about TurnKey Lender Medical Lending Software and start lending to your clients in-house.