Should you use cash or a loan to fund medical equipment for your medical practice?
- Jan 29
- 3 min read
Buying new medical equipment is often a necessary step as your practice grows. Whether it is diagnostic tools, treatment equipment or technology upgrades. These purchases can significantly impact your cash flow and tax position.
One of the most common questions we hear is whether it is better to pay in cash or use finance. The answer depends on your numbers, your growth plans and your risk tolerance.
Common issues we see include: •
Practices draining cash reserves to avoid debt
Underestimating the cash flow impact of large upfront purchases
Missing tax benefits from depreciation or finance structures
Taking on loans without understanding repayment pressure
Choosing the right funding option can help you:
Protect cash flow
Stay financially flexible
Maximise tax effectiveness
Support long term growth without unnecessary stress
Using cash to buy medical equipment
Paying cash can feel like the simplest and safest option, especially if your practice has strong reserves.
Pros of using cash:
No interest or finance costs
Full ownership from day one
Simpler administration
Things to consider:
Large cash outflows can strain working capital
Reduced buffer for wages, rent or other unexpected expenses
Less flexibility if growth opportunities arise
Best practice:
Only use cash if you still retain a healthy cash buffer
Ensure the purchase does not compromise day to day operations
Do:
Review your post purchase cash position
Do not:
Use all available cash just to avoid debt
Using a loan or finance option
Financing medical equipment allows you to spread the cost over time while preserving cash.
Common finance options include:
Equipment loans
Chattel mortgages
Leasing arrangements
Pros of financing:
Preserves cash flow
Predictable repayments
Ability to invest in higher quality or growth enabling equipment
Things to watch:
Interest and fees add to total cost
Repayments must align with cash inflows
Terms should match the useful life of the equipment
Best practice:
Match loan terms to the equipment lifespan
Ensure repayments are comfortably affordable
Understand all fees and conditions before signing
Cash flow should drive the decision
The right choice is rarely about cash vs loan when looking at the big picture, it is about cash flow timing.
Ask yourself:
Can the equipment generate additional revenue
How quickly will it pay for itself
Can repayments be covered even during quieter months
Tip from our experience: Practices that protect cash flow tend to grow more confidently than those that prioritise being debt free at all costs.
Understand the tax implications
How you fund equipment affects your tax outcomes.
Key considerations include:
Depreciation deductions
Potential instant asset write off eligibility
Interest deductibility on financed assets
Timing of deductions vs cash outlay
Best practice:
Get advice before purchasing, not after
Structure the purchase to align with your tax and cash flow position
Common mistake: Buying equipment at year end without understanding whether the deduction actually benefits your practice.
Balance growth and risk
Equipment should support growth, not create financial pressure.
Before committing, consider:
Your long term growth plans
Stability of your revenue
Existing debt commitments
Your comfort level with repayments
Sometimes a mix of cash and finance provides the best balance between flexibility and cost. There is no one size fits all answer when it comes to funding medical equipment.
If you’re unsure whether you should pay cash or take out a loan when paying for new medical equipment for your medical practice, speak to the team at Rise Accountants.
Our team can help you assess the cash flow, tax implications and funding options so you can make a confident decision that supports both your practice and long term growth.