Medical Equipment forms the major capital investment in the establishment of Hospital/Nursing Home/Diagnostic Center. Traditionally, Healthcare Providers procured equipment through bank loans. Owing to several reasons such as an increase in Healthcare Delivery costs, an increase in competition in concentrated healthcare clusters in Tier 1 cities, faster technology up-gradation and high leverages leading to reduced the additional credit availability is pushing Healthcare Providers to think alternative financing options for acquiring capital equipment.
Operating Lease can be an apt alternative for acquiring medical equipment. With operating lease, there is the flexibility to accessible technology up-gradation, capacity/software up-gradation, will not choke your credit lines and comes with flexible repayment options.
What Is an Operating Lease?
An operating lease is a contract that allows for the use of an asset but does not convey ownership rights of the asset. The meaning of the term 'off-balance-sheet financing' is it’s a leased asset and associated liabilities (i.e. future rent payments), and a company's balance sheet does not reflect it. Operating leases are considered a form of off-balance-sheet financing. Historically, operating leases have enabled companies to keep assets and liabilities from being recorded on their balance sheets, thereby keeping their debt-to-equity ratios low.
Understanding Operating Leases
For a Lease to work as an Operating lease, it must meet specific terms under generally accepted accounting principles. To determine whether rental contracts can qualify as operating Lease, companies must test for the following four criteria.
Ind AS 116, claims that the balance sheet should contain information about all the leases (unless they are shorter than 12 months).
Advantages of Operating Lease
Finbot with deep domain expertise and technology platform will help customers in building the suitable leasing model based on the equipment, projected caseload/cash flows and tax benefits.