September 15, 2017
Pharmacy work flow and automation equipment can increase productivity and allow pharmacists to spend more time providing patient care. But many independent community pharmacies don’t have the cash on hand to purchase or upgrade expensive pharmacy equipment.
That’s where leasing comes in.
“The value of leasing is helping business owners preserve their working capital,” said Scott Preiser, general manager of equipment leasing at Live Oak Bank, a bank based in Wilmington, N.C., that specializes in small business loans.
“They can hold on to that cash to use for their overhead and they’re able to achieve a real return on investment during the first month of using that equipment.”
Jimmy Neil, general manager of pharmacy lending at Live Oak Bank, said it’s not about buying or leasing pharmacy equipment, it’s about having financing options.
Leasing means low monthly payments, no money down, and the pharmacy owner gains efficiencies to make money more effectively, Preiser said. “It’s increasing the pharmacy’s return on investment on that equipment immediately, rather than using cash.”
Pharmacies have multiple options for leasing pharmacy equipment and can turn to their local bank for a loan.
Similarly, Live Oak Bank offers an equipment leasing program to help pharmacies acquire the pharmacy equipment they need. And, to maximize their return on investment.
Because Live Oak Bank understands pharmacy equipment financing and the lifecycle of the product, it can offer an advantage to pharmacies. “We’re able to establish a no-money-down capital lease with a dollar buyout at the end of the term,” Neil said. “It’s a different credit option than a purchase money loan, which may require 10 percent down and a different rate.”
And, he said an equipment lease benefits pharmacies more than a traditional U.S. Small Business Administration (SBA)-guaranteed loan because a lease takes less time to fund. “As we eliminate the government-guaranteed piece, we’re able to abbreviate applications and requirements and do a conventional leasing product.”
Live Oak Bank finances pharmacy equipment from $50,000 to $1 million. including
Equipment financing includes:
The term of the capital lease for the equipment is typically five years. At the end of the term, the pharmacy can purchase the equipment for one dollar.
Neil said the bank can extend the term beyond five years for more sophisticated adherence packaging products. It depends on the lifecycle of the product and what the pharmacy feels comfortable with.
“It’s quite an investment and we’re trying to accommodate cash flow needs,” he said.
It’s also an abbreviated loan application process. “We typically have a one-day credit turnaround and short form lease documents,” Preiser said. “We’re able to approve quickly and get the equipment faster.”
Additionally, the capital lease structure allows for depreciation of the equipment.
“You’re able to take full advantage of depreciation schedules according to the current law,” Neil said. “You can accelerate the depreciation of that asset, which could provide some income tax advantages.”
Neil said what makes Live Oak Bank’s equipment leasing program unique is the bank’s presence in the marketplace.
“We understand pharmacy,” he said. “My team and I all come from the business. We’re not former bankers—we’re industry experts.”
The bank is also technology-focused and has developed an efficient online application and lease processing platform. The bank can process the application and get the lease agreement within a few days. So, pharmacies can forego the frustration often experienced when dealing with a large bank that can’t answer their questions fast enough.
And, Preiser said Live Oak Bank treats every customer like its only customer.
“We’re developing a relationship and we’re giving them guidance on the best way to finance their equipment and maximize their return on investment on that asset,” he said. “So, we have a consultative role as well as a lending role, which is unique in the banking industry.”
51 – Percentage of pharmacies that use an automated dispensing counter
30 – Percentage of pharmacies that use an automated dispensing system
5 – Number of years of a typical capital lease
$50,000 – $1 million – The range of financing needed for pharmacy automation equipment
Sources: 2016 NCPA Digest, Live Oak Bank
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