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How Financing Can Carry Your HME Business Through Times of Change

Posted on in Growth Strategies

By: Chad Hamann, VGM Financial Services

The most important investment an HME can make in equipment may be time spent investigating how to pay for it.

Cash flow issues arise within an HME business as a result of both growth and challenges in the HME market. Establishing a line of credit with an equipment finance company before cash flow is weak can help maintain consistent cash flow and avoid any shortfalls while being able to purchase the needed equipment.

With planning, those managing an HME business can establish a lease line of credit then use it to get the most out of the financial flexibility it provides. For example, by locking in a fixed monthly payment over time, cash and bank lines can be preserved for other operating or short-term needs.

Pay Over Time or Up Front

Consider equipment as if it were an employee: Rather than pay an employee's salary up front each year, payments are spread over time. HMEs can do the same with equipment purchases. Structuring an equipment lease to match the reimbursement period allows the equipment to work for the business – and generate revenue – as payments are made.

However, before making any finance decisions, HME providers should determine if equipment qualifies for a lease and generates sufficient revenue on a monthly basis. If it is a cash-and-carry type of product, it may be better suited for purchasing with cash on hand or bank lines.

Lease vs. Purchase

Whether the plan is to grow the business or avoid running into cash flow problems, cash saved by leasing equipment can help carry the business through tough times. Financing flexibility is endless and an important asset to the ever-changing HME industry.

Equipment finance companies that specialize in the HME industry understand the unique economic environment and the demands placed on equipment. Unlike traditional lenders, equipment finance companies often package equipment, software, installation, training, maintenance and other services into a single lease.

Cash Flow During Growth

HME providers can also experience cash flow issues during times of growth, including landing a new contract or being the lowest responsible bidder in the competitive bidding process. A cash flow shortage could prohibit a business owner from pursuing these and other growth opportunities, such as:

  • Opening a new location
  • Offering niche products
  • Expanding via acquisitions

These opportunities require additional capital to purchase the necessary equipment to service a contract or its patient base. This is another reason to have a lease line of credit established in advance with an equipment finance company.

Whether an HME is experiencing growth or a challenge – e.g., competitive bidding, Medicare audits, deductible season payment delays –  taking the time to explore equipment finance options will help maintain flexibility during periods of change.

What You Need to Know

VGM Financial Services provides business-to-business equipment financing solutions to homecare providers and manufacturers with industry-specific programs that increase sales and market share. Contact Chad Hamann, national account manager, at 800-532-4656 or [email protected]

The perspective offered by Chad Hamann is based on his expertise and is not necessarily the view of VGM Financial Services. This article does not constitute tax or accounting advise.

 

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