Before we look at the pros and cons of dental equipment financing, let's talk about equipment financing 101. In a nutshell, dental equipment financing involves taking out a loan, so you have enough capital to purchase the tools and equipment needed for your practice.
You then repay the loan through installments over a fixed period, with interest. With that out of the way, here are the pros and cons of dental equipment finance you need to know.
There are several benefits that come with equipment financing:
Dental equipment financing allows you to get your practice off the ground sooner rather than later. Therefore, instead of waiting months or years to realize your dream, you get access to fast financing. Also, because the cost of the equipment is spread out, you can keep your cash flow neutral.
The equipment you purchase with the borrowed funds will be used to secure the loan. By providing collateral, you lower the lender's risk, meaning you will get a lower rate compared to unsecured loans. Plus, you don't have to worry about coming up with suitable collateral, since the equipment itself will do.
Equipment financing is a type of secured loan, so it's easier to qualify for because of the lowered risk. You have a better chance of qualifying if you are a start-up or if you have a not-so-perfect credit score, for instance. In addition, if you opt for an alternative lender, you can expect the application process to be faster, simpler, and more streamlined.
Equipment financing also comes with the following disadvantages:
Sometimes you may be required to make a down payment when applying for equipment financing. If you're purchasing expensive equipment, then a down payment of between 10 and 25% can be difficult to afford. It then becomes harder to qualify for financing.
Keep in mind that since you're taking out a secured loan, it's more important than ever to pay the loan as agreed. Otherwise, the lender will repossess the equipment to recover their investment if you default.
In conclusion, dental equipment financing can be a good thing. According to the ADA Marketplace, it is estimated that opening a dental practice requires as much as $240,000 to cover costs such as the construction of new rooms, renovations, and repairs.
You can cover these costs with the help of dental equipment financing. On the other hand, you also need to consider the pros to make an informed decision.