Once a key differentiator for optical practices, optical coherence tomography (OCT) is almost a prerequisite today with ultra widefield now providing the wow factor, according to Stuart Burns, managing director of finance company Performance Finance.
‘Both options provide the benefit of early detection of potentially serious eye conditions, such as glaucoma, diabetic retinopathy, retinal detachment and tumours,’ he says.
With OCT prices ranging from £20,000 to £100,000, the equipment can appear out of reach for many, but fortunately equipment suppliers and finance companies are at hand to provide expert advice and affordable finance packages.
Financial options
Performance Finance can fund purchases from £1,000 upwards for all optical equipment with the upper range dependent upon a client’s requirements and affordability.
‘Costs do vary, depending on the specification of the device. However, as a guide, the average cost of an OCT is around £28,000
plus VAT,’ says Burns (pictured right).
Lease, hire purchase and loan facilities are available from the company with equipment normally funded via lease or hire purchase and repayment terms are offered from six months to seven years.
For businesses with the capital to purchase equipment outright, Burns points out that it does not always make sense to do so as they may be able to reclaim VAT if they finance their purchase.
‘If a practice is within the VAT de minimis threshold (less than £7,500 a year), it may be possible to reclaim the VAT on sight test equipment,’ he says.
By contrast, if a practice bought an OCT outright for £50,000, the 20% VAT of £10,000 would be due straight away as it would exceed the ‘de minimis’ and the practice could lose £7,500.
Buying OCT equipment outright can also negatively affect cash flow. If a practice spends £30,000 on an OCT, which earns £2,000 a month in scan fees, it will take 15 months to pay the money back before making a profit. But if the practice receives a payment profile of £600 a month, including interest, under hire purchase or lease, they will be earning £1,400 a month straight away.
Burns adds: ‘Furthermore, investing in equipment should allow a practice to offset the cost against their taxable profits. With anywhere between 19-45% of the cost of the machine back, investing in equipment lowers a business’s tax liabilities,’ he says.
Once an investment in OCT is made, practices do not need to secure a high volume of patient scans before the equipment pays for itself and starts making a profit, as Burns highlights.
‘As a guide, if an OCT costs £28,000 and a practice is testing five days per week and charging £25 per scan, it would only need to scan one patient a day to cover the finance costs over a five-year period,’ he says.
Positive market
With the optical market well recovered following the Covid-19 pandemic, Braemar Finance highlights that its latest data shows the majority of practices (83%) are planning on seeking to invest in their businesses.
‘Opticians are positive about both their own and the UK’s economic prospects,’ says David Angus, sales director at Braemar Finance (pictured left).
The company offers a variety of funding options, including hire purchase, leasing and loans, with lending from £5,000 upwards and payment terms of up to seven years.
‘Typically, we help practices finance eye testing and glazing equipment, general retail or computer technology or any other business critical assets. We will also provide finance for practice fitouts and refurbishment costs. Business loans can cover costs like partner buy-ins, goodwill and tax. All our facilities are available to new starts and established businesses,’ says Angus.
All of the company’s facilities have fixed payments, allowing for ease of budgeting, and initial payments can be structured to allow for lower initial payments early on, which Angus says is particularly useful for start-ups or practices investing in new technology.
While finance leases are popular, Angus points out that where either VAT de minimis is not a concern, or the equipment is fully allowable for VAT purposes then products such as hire purchase may be more appropriate. ‘HP comes with a different set of tax advantages. We would always encourage opticians to seek independent advice from their accountant about the appropriate options,’ he says.
Financial advantages aside, Angus adds that investing in OCT and other equipment has numerous other benefits for high street practices. ‘Staff and patients are reassured when they are in an environment where practices are using the latest technology and modern equipment. It is important that staff feel they have the best equipment to provide the optimum clinical support to patients.
‘This equally resonates with patients who will be aware of the latest clinical testing equipment at large competitors, reaffirming their choice of who to use,’ he adds.