How to Finance Medical Devices for Your Practice

Medical devices often represent one of the largest capital investments a practice will make outside of property.

Whether you're establishing a new clinic, upgrading imaging equipment, or adding diagnostic tools, the way you structure that purchase affects both your immediate cashflow and your long-term capacity to grow. Asset finance allows medical practitioners to acquire the equipment they need while managing repayments over time, preserving capital for staffing, premises, or other operational needs.

The structure you choose depends on how quickly the technology becomes obsolete, how you want to treat the asset for tax purposes, and whether you intend to own the equipment outright at the end of the term.

Why Medical Practices Use Asset Finance Instead of Paying Cash

Asset finance allows you to spread the cost of equipment over its useful life rather than depleting working capital in a single transaction. Even when cash is available, financing the purchase preserves liquidity for unexpected expenses, staffing gaps, or opportunities that require immediate funds. The interest rate on a secured asset loan is typically lower than other forms of business borrowing because the equipment itself acts as collateral.

Consider a general practice adding ultrasound equipment. The device costs $80,000. Paying cash ties up funds that could cover three months of overheads. Financing the equipment over five years with fixed monthly repayments allows the practice to generate revenue from the new service while maintaining a buffer for day-to-day operations. The repayments are structured to align with the income the equipment generates, rather than creating a sudden strain on reserves.

Depreciation also plays a role. Medical equipment is a depreciating asset for tax purposes, which means a portion of the purchase price can be claimed each year. Depending on the structure you choose, you may also claim the interest component of each repayment as a business expense. This makes financing more tax-effective than it first appears, particularly when combined with instant asset write-off provisions where applicable.

Chattel Mortgage for Practices That Want to Own the Equipment

A chattel mortgage is a secured loan used to purchase equipment, where you own the asset from day one but the lender holds a mortgage over it until the loan is repaid. This structure suits practices that intend to use the equipment long-term and want to claim depreciation and interest as tax deductions.

You make fixed monthly repayments over the loan term, which typically ranges from two to seven years depending on the equipment type and its expected lifespan. At the end of the term, the loan is fully repaid and the mortgage is discharged. Some chattel mortgages include a balloon payment, which reduces the monthly repayment amount but leaves a lump sum due at the end. That balloon can be refinanced, paid from practice funds, or settled through an equipment upgrade if the lender offers that option.

For a dental practice purchasing a CBCT scanner, a chattel mortgage with a 30% balloon payment might reduce monthly commitments by several hundred dollars, making it easier to manage cashflow in the first few years when patient uptake is still building. The balloon is then settled when the practice refinances or uses accumulated funds. This structure works when you're confident the equipment will still be in use and generating income at the end of the term.

Finance Lease and Operating Lease Structures

A finance lease allows you to use the equipment without owning it during the lease term. You make regular lease payments, and at the end of the term, you can either pay a residual amount to take ownership, refinance the residual, or return the equipment. The lender owns the asset throughout the lease, but you're responsible for maintenance, insurance, and repairs. Lease payments are generally tax-deductible as a business expense, and GST is built into each payment rather than paid upfront.

An operating lease is similar, but structured around the assumption that the equipment will be returned or upgraded at the end of the term. This suits technology that becomes outdated quickly, such as ultrasound machines, imaging systems, or diagnostic devices where manufacturers release new models regularly. Monthly payments under an operating lease tend to be lower because the residual value is higher. The equipment never appears on your balance sheet, which can be relevant if you're managing debt levels for lending purposes or preparing for a practice sale.

In our experience, practices that upgrade equipment every three to five years favour operating leases because they align the lease term with the upgrade cycle. Rather than owning ageing equipment with diminishing resale value, the practice returns the device and leases the updated model. That approach keeps the practice current without carrying obsolete assets.

Hire Purchase for Equipment You'll Use Until End of Life

Hire purchase is a loan structure where you make regular payments over a set term and own the equipment outright once the final payment is made. There's no residual or balloon payment. The equipment acts as security for the loan, but ownership transfers to you at the end without any further cost.

This structure suits equipment with a long useful life that you intend to use until it's no longer serviceable. Fixed monthly repayments make budgeting straightforward, and you can claim depreciation and the interest portion of each repayment as tax deductions. The GST on the purchase price is typically claimable upfront if you're registered for GST, which reduces the initial cost.

For a physiotherapy practice purchasing treatment tables, electrotherapy units, or other durable equipment, hire purchase provides certainty. The equipment will be used for a decade or more, and there's no benefit in structuring a residual or returning the items. The practice owns the assets outright at the end of the term, with no further obligation.

How Lenders Assess Medical Equipment Finance Applications

Lenders assess asset finance applications based on the practice's cashflow, the type of equipment being purchased, and the borrower's credit profile. They want to see that the practice generates sufficient income to meet the repayments, and that the equipment itself holds enough value to act as security. For established practices with consistent revenue, approval is usually straightforward. For newer practices, lenders may ask for additional financial information or require a director's guarantee.

The loan amount is typically capped at the equipment's purchase price, though some lenders will include delivery, installation, and training costs if those are invoiced as part of the transaction. Interest rates vary depending on the lender, the equipment type, and the term, but secured asset finance generally sits below unsecured business loan rates. The equipment itself reduces the lender's risk, which is reflected in the pricing.

Vendor finance and dealer finance are also common in the medical equipment sector. These arrangements are offered by the equipment supplier rather than a traditional lender, often at promotional rates or with deferred payment periods. They can be convenient, but it's worth comparing the rate and terms against what a broker can access through the wider lending panel. In some cases, vendor finance is competitive. In others, a chattel mortgage through a bank or specialist lender provides lower repayments and more flexibility.

Tax Benefits and GST Treatment Across Different Structures

The tax treatment of asset finance depends on the structure you choose. With a chattel mortgage or hire purchase, you own the equipment and can claim depreciation as a tax deduction each year. The interest portion of each repayment is also deductible. If you're registered for GST, you can claim the GST component of the purchase price upfront, which reduces the effective cost of the equipment by one-eleventh.

With a finance lease or operating lease, the lease payments themselves are generally tax-deductible as a business expense, and GST is included in each payment rather than paid upfront. You don't claim depreciation because you don't own the asset, but the total deduction over the life of the lease can be comparable depending on the residual value.

For practices looking to maximise deductions in the early years, a lease may deliver higher claims because the full payment is deductible, not just the interest and depreciation components. For practices planning to hold the equipment long-term, a chattel mortgage or hire purchase may be more tax-effective once the loan is repaid and the asset is fully depreciated.

Your accountant will guide you on which structure aligns with your practice's broader tax strategy, particularly if you're managing multiple entities, trusts, or investment structures alongside the practice.

Structuring Repayments Around Practice Cashflow

Fixed monthly repayments provide certainty, particularly for practices operating on predictable revenue cycles. You know exactly what's due each month, which makes budgeting simpler and reduces the risk of cashflow strain during quieter periods. Most asset finance agreements are structured with fixed rates, though variable rate options exist for practices that want the flexibility to make additional repayments without penalty.

Balloon payments reduce the monthly commitment by deferring part of the loan to the end of the term. That can be useful when cashflow is tight in the early years, or when you're confident the practice will generate higher revenue by the time the balloon is due. The risk is that the balloon becomes a burden if income doesn't grow as expected, or if the equipment needs replacing earlier than planned. Refinancing the balloon is an option, but it extends the total time you're paying for the equipment and increases the overall interest cost.

For practices with seasonal income or variable patient loads, structuring the loan term and repayment frequency around those patterns reduces the risk of missed payments. Some lenders allow quarterly or six-monthly payment schedules, though these are less common and usually come with slightly higher rates.

If you're upgrading existing equipment, the timing of the new finance relative to when the old equipment is paid off can affect cashflow. Overlapping repayments create a temporary increase in outgoings, which needs to be planned for. Selling or trading in the old equipment can offset part of the new purchase, reducing the loan amount required.

When to Refinance or Restructure Existing Equipment Finance

Refinancing asset finance makes sense when interest rates have dropped, when the practice's financial position has improved, or when the existing agreement includes unfavourable terms like high fees or restrictive clauses. If you've been making repayments for several years and your credit profile has strengthened, you may qualify for a lower rate or more flexible terms with a different lender.

Restructuring can also help if cashflow has become strained. Extending the loan term reduces monthly repayments, though it increases the total interest paid over the life of the loan. Adding a balloon payment to an existing agreement may not be possible without refinancing, but it's worth exploring if repayments are becoming unmanageable. In some cases, consolidating multiple equipment loans into a single facility simplifies administration and reduces overall repayments, particularly if some of the original loans carried higher rates.

Practices preparing for sale sometimes refinance equipment loans to clean up the balance sheet or remove director guarantees, making the business more attractive to buyers. That process takes time, so it's worth starting the conversation with a broker well before you intend to list the practice.

Call one of our team or book an appointment at a time that works for you. We'll assess your equipment needs, compare finance options across banks and specialist lenders, and structure a solution that aligns with your practice cashflow and growth plans.

Frequently Asked Questions