A device lease governs the right to use equipment and the related payment and end-of-term obligations. A service contract governs specified maintenance or repair support. In a med spa acquisition, buyers must identify both arrangements, the legal owner, transfer conditions, liens, remaining cash commitments, and what coverage actually continues after closing.
What is the difference between the two contracts?
Device lease means a contractual right to use identified equipment subject to payment, term, return, purchase, and other conditions. Device service contract means an agreement for specified maintenance, repair, support, or related services. Their legal and accounting treatment depends on the actual terms.
A practice may own a device outright but pay separately for service. It may lease a unit with maintenance included, finance a purchase through a loan, or combine equipment, consumables, and software in a bundled arrangement. Do not infer the structure from a monthly bank withdrawal.
The valuation hub places these obligations beside earnings and acquisition cash needs. Identify every material contract before pricing equipment as an included asset. A buyer can otherwise pay for a device in the headline price and discover a separate required buyout or restricted assignment later.
Which documents establish the cash commitment?
Obtain the signed agreement, amendments, equipment schedule, payment history, remaining-payment statement, payoff quote, purchase option, end-of-term requirements, security documents, and relevant notices. Confirm model and serial numbers against the equipment physically present.
Review insurance, maintenance, minimum-use, consumable purchase, software, return, relocation, and renewal provisions. Some obligations survive even if the buyer no longer wants the device. Ask counsel to interpret automatic renewal and termination provisions, including notice deadlines and any remaining liability.
Use the device vintage and replacement capex definition to keep contract duration separate from technical or economic life. A lease ending next year does not establish when equipment needs replacement. A long remaining term does not prove the device remains commercially useful throughout that period.
How should a remaining-payment example be calculated?
Suppose, illustratively, a lease has 22 payments of $2,450 remaining and a $12,000 purchase option. Nominal payments total 22 × $2,450 = $53,900; exercising the assumed option produces $65,900 before any other charges. This is not a payoff quote or a present-value calculation.
Now assume a separate annual service agreement costs $9,600 and an assignment charge is quoted at $1,250. Keep those amounts separate. The buyer must verify whether service transfers, when payment is due, and whether the assignment quote covers all required changes.
| Category | Assumed amount | Qualification |
|---|---|---|
| Remaining lease payments | $53,900 | Nominal schedule, not payoff |
| Purchase option | $12,000 | Only if exercised as assumed |
| Annual service | $9,600 | Coverage requires review |
| Assignment fee | $1,250 | Written consent still needed |
The invented numbers illustrate why one monthly payment figure is not a complete acquisition cost.
How do assignment and change of control affect closing?
Identify the legal party to each contract and the transaction type. An asset transfer, equity sale, relocation, or new professional entity may trigger different terms. Do not assume that selling the company avoids consent requirements or that a seller can assign rights without the counterparty’s agreement.
Request written instructions from the lessor, lender, manufacturer, and service provider as applicable. Confirm who pays any fee, which obligations the buyer assumes, whether guarantees are released, and when the new arrangement becomes effective. Keep the responses in the closing file.
The Med Spa Continuity Risk Map helps identify operational effects. A device can remain in the room while software access, consumable supply, remote support, or insurance coverage changes. Scheduled treatments require an appropriate continuity plan, not merely a signed bill of sale.
What should a service review ask?
Review covered components, exclusions, consumables, response times, travel charges, preventive maintenance, replacement parts, software, loaner availability, and service-provider qualifications. Ask what happens if the manufacturer stops supporting the model or the practice moves it.
The FDA medical device database directory supports regulatory research about the identified equipment. It does not establish the device’s physical condition or interpret a service contract. Use qualified technical inspection and manufacturer evidence for condition and support assumptions.
Compare service history with the contract. Repeated repairs, unresolved notices, or excluded handpieces can change near-term cash needs. A warranty is not identical to comprehensive maintenance, and a maintenance agreement is not a guarantee of uninterrupted operation. Record the remaining uncertainty and budget a reasonable disclosed scenario instead of assuming every repair is covered.
How do the obligations affect earnings and price?
Ask the transaction accountant to determine the presentation of actual payments and costs. Operating maintenance, lease expense, financing interest, principal, and capital purchases are distinct concepts. Avoid adding back every device-related payment simply because a contract has financing features.
The SBA financial-management discussion emphasizes considering assets, liabilities, and cash together. Prepare a cash schedule alongside the historical earnings bridge. If the buyer assumes a payment obligation, its effect must appear consistently in financing, price, and funds flow.
Tax and allocation questions also require professional review. The IRS overview of selling a business explains that different assets can have different sale treatment. Do not equate a tax basis, book balance, payoff amount, and market value. Each answers a separate question and may differ materially for the same device.
What do buyers, sellers, and lenders each need?
A seller needs an accurate contract inventory and a clear understanding of personal guarantees and release conditions. A buyer needs the rights and support necessary for its operating plan, with a complete cash budget. A lender needs verified ownership, liens, collateral information, and assumed obligations under its own underwriting approach.
Use the Offer-to-Proceeds Bridge to show seller payoffs and deductions. If a lease liability is reflected in price or working capital, make sure it is not deducted again without justification. If the buyer assumes it instead, document that treatment explicitly.
The Four-Number Med Spa Valuation Screen separates earnings, owner replacement, equipment cash, and prepaid obligations. A device’s contract burden can interact with packages already sold, but the two obligations should remain traceable rather than disappear into a general adjustment labeled equipment risk.
How should bundled contracts be separated?
Ask for an itemized explanation when a payment bundles equipment access, software, service, and consumables. The buyer needs to know which rights continue if one component changes and whether minimum purchases remain due despite lower utilization. Do not invent allocations merely to improve earnings.
Have the accountant and counsel review the agreement and obtain clarification from the counterparty where needed. Preserve the original contractual amount beside any analytical allocation. If a service component cannot be separated reliably, label that limitation and test the combined cash commitment instead of presenting a precise unsupported margin for the device.
What is the final verification sequence?
Refresh material quotes and consent status near closing because balances and terms can change. Confirm the date through which each payoff is valid and the exact unit it covers. Resolve discrepancies before relying on the final funds flow.
- Match units to legal ownership and serial-level contracts.
- Reconcile remaining payments, options, liens, and guarantees.
- Review service scope and qualified condition evidence.
- Obtain necessary written assignment or change-of-control responses.
- Allocate payoffs, fees, and assumed obligations consistently.
- Confirm effective support and access on the buyer’s first operating day.
The med spa due-diligence guide provides the wider record request context. Keep unresolved items visible. A complete register can show the buyer which equipment is worth retaining, renegotiating, replacing, or excluding, without pretending that all devices with similar monthly payments have equivalent economics.
What else do owners and buyers ask?
Does the seller own a device if it appears on the asset list?
Not necessarily. Confirm legal ownership, lease or finance terms, liens, serial numbers, and any assignment conditions. An accounting schedule or physical possession is not sufficient evidence by itself. The purchase documents should identify which rights transfer and which obligations are paid off, retained, or assumed.
Are all remaining lease payments the same as a payoff amount?
No. A payoff can depend on the contract, timing, purchase option, fees, and lessor's calculation. Obtain a written quote identifying the unit and validity period. Use the nominal payment schedule for planning only, and do not substitute it for the amount required to release or transfer the obligation.
Can the buyer assume service coverage continues automatically?
Do not assume that. Review assignment, change-of-control, relocation, software, warranty, and eligibility terms with the relevant counterparties. Confirm the effective date and covered components in writing. A device may transfer while important support rights do not, which can affect downtime and cash needs after closing.
Should device payments be added back to earnings?
The accountant must review the actual arrangement and starting statements. Maintenance, lease expense, interest, principal, and capital purchases have different roles. Retain necessary operating costs and show financing or replacement cash separately. A payment's connection to equipment does not automatically make it a valid earnings add-back.
Which sources support this guide?
Sources were checked during research. Regulations, lender policies, and market conditions can change. Use the linked primary material and your advisors to confirm applicability.
- Medical Device Databases — U.S. Food and Drug Administration
- Manage your business — U.S. Small Business Administration
- Sale of a business — Internal Revenue Service
Educational analysis prepared with AI-assisted research for The Med Spa Broker. “Last reviewed” records the source and editorial check date; it does not imply review by an attorney, clinician, or independent appraiser. Read our editorial standards.