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  • Financial Sector
31 May 2018

Rental financing : from the asset-based economy to the economy of functionality

by Pierre ELBAZE, Hospital Technologies and Innovations

After the massive adoption of leasing by health establishments over the last ten years and, more recently, the addition of maintenance leasing to its tendering procedures, particularly for heavy imaging, UGAP has recently started to offer a leasing financing method in an executed mode.Interest and advantages according to Fadéla Ghavampour-Khaldi, Project Manager, Purchasing Department, UGAP.


A modality of evolution without constraint

Health care institutions are faced with a dual challenge: a very strong budgetary constraint and maintaining their equipment at an optimal level. It is clear that not all expenses can be absorbed by the investment section. In this respect, UGAP’s rental financing offer adds a possibility to cover these needs and to arbitrate between an acquisition, leasing and rental financing, which is interesting for certain rapidly obsolescing equipment. “UGAP wants to offer the most complete range of financing and arbitrage options for equipment expenditure, not to substitute one form of financing for another, but to offer a choice according to its strategy. While leasing remains a legacy approach, allowing for a smoothing out of the expense, without any service and maintenance component, rental financing, which has been in use for years in the private sector, allows for the unlimited integration of a software component, a service component, and the possibility of making additions and upgrades to the equipment without constraint over the entire life of the contract, and therefore to always have equipment at the best level. “To put it simply, this means moving from a legacy economy, where you become the owner of the equipment, to a functionality economy, based more on usage.

UGAP, the “unique renter”

UGAP has also set up this method in response to a request from hospitals to have a single point of contact for all types of equipment. “In addition to medical equipment, healthcare institutions also use IT equipment, vehicles, etc., and this cross-functional offer covering the entire catalog is of real relevance to our hospital customers. It also has an important advantage: it gives hospitals the freedom, depending on their internal organization, to include maintenance or not and to move away from maintenance leasing. The method works in the form of a framework agreement that allows for subsequent contracts to be drawn up according to very specific needs or support. “The first subsequent contract, designed to cover the majority of our customers’ needs – healthcare institutions, local authorities, ministries and other public players – was opened at the beginning of the year and is currently being rolled out.”

Financing in “execution” mode

For the first time, UGAP is offering lease financing in an executed mode. Unlike the non-executed mode of leasing, the rents pass through UGAP, with the credit risk being borne by the purchasing group. “UGAP pays the bank and re-invoices the hospital client, giving it two important advantages: price performance on the equipment market, since the bank will actually buy the equipment on the public client’s terms and conditions and on the terms and conditions that UGAP will have negotiated with its equipment suppliers, and financial terms based on the UGAP risk, the rate of which no longer depends on the financial situation of the institution. To support this offer, the central purchasing agency has selected a group of six partners: “This group is extremely solid, with skills that have worked in synergy on this call for tenders and allow us to offer our public customers a performance on this market. For public sector clients, and in particular for healthcare institutions, this also means very simple operating procedures. “In concrete terms, the client defines its equipment needs, obtains an estimate in terms of rent in order to make its choice, and simply places a rent order on which the equipment order is grafted. UGAP then places the order with its supplier on behalf of the public customer, and the equipment is delivered.” Customers have the option of buying back the equipment at the end of the contract, at market value, extending the contract to seven years or returning the equipment. “All the possibilities that were available to us in this market have been integrated in order to offer the greatest flexibility to our customers,” concludes the project manager.