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Optical finance Q&A – funding options explained

At some point every optical practice will need to make a significant investment in large equipment, for example OCT machines. For many Opticians this can be a daunting prospect – but it doesn’t need to be if you understand the many and varied funding options available to you.

Braemar Finance Area Manager for Republic of Ireland, explains how a large purchase doesn’t need to impact your cash flow and the advantages of taking out finance over buying outright, among many other issues.  

What is Braemar Finance’s background and experience working with the optical sector?

Braemar Finance have been supporting the optical sector for over 25 years. We are part of Close Brothers, a direct lender that specialises in supporting SMEs. At Braemar Finance, we pride ourselves on the quality of our service levels, delivered by our eight experienced Area Managers across Ireland and the UK, and supported by a dedicated support team at our Scottish head office.

What sort of prices would optical practices be looking at for large equipment purchases, such as OCT machines?

Entry level OCT machines can start at around €25,000 and then upwards to €50,000 for high-end units.

What options are available to optical practices who are looking to purchase new equipment but wouldn’t like to pay the cost up front?

We have a range of funding options that includes Hire Purchase, Finance Lease and Loans*. We can arrange funding from as little as €1,000 upwards with repayment terms of up to seven years.

We often find that when a practice is acquiring new equipment, they often use this as an opportunity to replace and upgrade other assets, all of which we can look to support with finance facilities.

Many practices today are also having to adjust their practices to ensure patients and staff are operating in a safe environment. We can also help practices who are incorporated by providing unsecured loans to help pay for this expense while retaining cash within the practices.

What finance options are available for new start-up Opticians?

We have a proud history of supporting new Opticians and can provide a funding option designed specifically with both start-ups and expanding businesses in mind.  Our Low Start product provides a flexible repayment option, enabling us to match repayments based on expected income levels.  This means the Optician could pay a minimal monthly payment for an initial period up to a maximum period of six months. This allows the Optician time and space to build up cash flow in the business while having full use of the equipment.

Do you deal with optical equipment suppliers?

We have a long record of dealing with equipment suppliers in both the Republic of Ireland and the UK. Once finance is approved Braemar Finance can provide the equipment supplier with a letter confirming finance approval. This gives the supplier great comfort as Braemar Finance is a trusted partner in the optical sector. We then pay the supplier directly on receipt of an invoice.

What are the advantages of finance, compared to saving up and buying outright?

Retaining valuable cash resources in your business is as important now as it has ever been. The main advantage of finance is that it helps a practice to manage its cash flow, aligning the cost of the equipment through fixed monthly payments against the future revenue of the practice.

If, for example, the equipment is intended to offer a new service, the revenues may take time to build up - we can look to arrange the Low Start payment option to help with cash flow. This is one of many options we can explore with practices.

Does Braemar Finance offer lease options?

Yes, Leasing is very popular in the optical sector. We would always encourage our clients to seek guidance from their accountants to ensure whether a Lease or Hire Purchase is the best option, particularly with regards to VAT and tax planning.

Are there VAT and other tax benefits to financing large purchases? What about cash flow?

How the practice decides to fund the equipment will impact how the VAT is paid. Most optical practices will choose to fund equipment using Finance Leases as this will enable them to reclaim VAT.

Financing is tax efficient with the potential to offset the cost of the asset against tax or over the term of the agreement depending on how we agree to structure the finance. In deciding what is appropriate, our area managers will take clients through the features and benefits of the various options and will happily liaise directly with a practice’s accountants or financial advisors to ensure the facility meets with the financial objectives of the business.

What is the return on investment of having equipment, such as an OCT machine, in practice? Do stats show this offsets the price of financing?

The return on investment (RoI) will vary from one practice to another.

This can be very attractive as the repayments are fixed and the practice will charge patients each time the equipment is used. We certainly wouldn’t expect our clients to prepare an RoI analysis to justify the purchase. We will always ask a client ‘why are you buying this equipment’ because the answer will tell us a lot about the practice and ensure our financing is aligned to those objectives.

Is there a more abstract financial benefit to utilising equipment, such as attracting more patients?

Yes. While most practice principles will have a clear rationale as to why they are purchasing equipment, there are normally many intangible benefits that are difficult to value. This could include employee satisfaction, particularly if you are upgrading equipment or giving your staff the opportunity to develop new skills if you are offering a new service.

Today, particularly, there is heightened awareness of the clinical environment in meeting the safety standards required due to Covid-19. Consulting rooms equipped with the latest equipment will reassure patients and attract new ones while potentially attracting referrals from other sources, like GPs.

*Only available to Companies in the Republic of Ireland