Four questions to ask before you buy new dental equipment
Four questions to ask before you buy new dental equipment.
Who wouldn’t prefer an office brimming with new technologies and equipment over one with out-dated models?
The answer may seem obvious – unless you are a dentist who has seen the price tag on a state-of-the-art dental office. A Periapical X-ray unit, for example, retails for as much as $5,000. A top-of-the-line patient chair could set you back $9,000. Factor in the cost of the latest hand pieces, sterilization systems, operating lights, computers and all the other furniture, supplies and equipment a dentist needs, and you could be looking at a total investment of $150,000 or more for an office upgrade or expansion.
While your heart might be telling you to focus on the amazing advances this equipment offers to today’s dentists, your brain might be slamming on the financial brakes. Before you make a decision, there are four key questions to consider:
1. Is the investment worth it?
Some purchases are “no-brainers.” If the cost to repair existing equipment approaches that of total replacement, for example, buying new is common sense. So does purchasing essential equipment that will pay for itself in a reasonable length of time.
The decision is less clear-cut when buying equipment that is not central to your practice and may not deliver the return-on-investment (ROI) needed to justify its purchase. For example, consider the special equipment needed for cosmetic dentistry. It could take longer than its expected life to deliver a return, especially if the demographic you serve cannot afford the expense associated with dental aesthetics. A wise practitioner will sit down – often with a financial adviser – and literally do the math when considering options.
2. How long will it take for the equipment to begin paying for itself?When you are figuring the ROI on a potential purchase, keep in mind that most equipment does not begin generating revenue on Day One. In fact, it can take months to build the business and collect the patient payments needed to begin payback.
Understanding this lag time is important when working with a lender to create a payment schedule for a loan. A lender that is accustomed to working with dentists is more likely to work with you and design a payment plan that factors in lower first-year revenues and keeps your cash flow strong.
3. Is it better to lease or purchase?It depends. There are advantages to each approach. An equipment company’s leasing business, for example, may allow a dentist to trade in a piece of equipment for a newer model before the lease ends. Be sure to ask about interest rates. Some equipment companies tend to bury this information.
If you are interested in owning equipment outright, a dentist-friendly bank, on the other hand, may offer a better interest rate, potentially saving money and making it easier to reach your goal of ownership. A bank may also offer payment options not available in equipment leases, such as interest-only payments at the onset. Also, if you have visions of long loan applications, you may be pleasantly surprised.
4. What if I must act quickly?Dentists often plan expansions or exam room upgrades years in advance. But sometimes, a need or an opportunity presents itself when it is least expected.
That is why virtually EVERY dentist will benefit by getting pre-approved for financing before they start an equipment search. If you haven’t already been pre-approved, you might look for financing options designed specifically for dental practices. Commerce Bank, for example, offers a Fast Track Dental Loan Program that makes it easy for a dentist to move quickly when necessary. The process results in a preapproved, guidance line of credit that converts into a term loan when you make a purchase.
The bottom line. The decision to expand or upgrade dental office is an expensive proposition – and it might be just the thing you need to grow your practice. A key component to building a successful practice is selection and timing of expenditures combined with the financing solution that will enable you to meet your business goals. Let Commerce Bank be a resource to help you do the math and determine what solutions are right for you.