Pharmacy Business Loans: How to Apply & Use Them | Fora Financial
Pharmacy Business Loans: How to Apply & Use Them
July 30, 2019

Pharmacy Business Loans: How to Apply & Use Them

If you want to start your own business, opening a pharmacy can be a profitable endeavor. Compared to other industries, independent pharmacies have a healthy profit margin — 22.1 percent on average in 2016, according to the National Community Pharmacists Association.

In addition, despite the rise in big chains, independent pharmacies represent 40 percent of all community pharmacies in the United States. They also employ more than 60,000 pharmacists nationwide.

Nevertheless, purchasing or growing an existing pharmacy typically requires a substantial amount of capital, resulting in relatively high barriers to entry. This means you’ll likely need a business loan if you don’t have the necessary cash on hand — and a rather large one at that.

Everything You Need to Know About Pharmacy Business Loans:

Why You Need Financing for Your Pharmacy:

While pharmacies can be quite profitable compared to other business ventures, they’re also typically much more costly to start. Some experts estimate you’ll need at least $300,000 in working capital to acquire or start an independent pharmacy.

If you’re already a pharmacy business owner, you may need additional capital to expand or purchase inventory, just to name a few examples. In these instances, a small business loan can be beneficial.

Many lenders are willing to provide term loans to businesses in the medical industry because their services are always in demand. However, because you’ll borrowing a substantial amount of capital, you’ll need a strong credit history and solid business plan.

How to Apply for a Pharmacy Business Loan:

Many independent pharmacies pursue loans or business lines of credit from alternative lenders. For example, at Fora Financial, we work with many pharmacy owners and can supply them with loan amounts up to $500,000. When you apply for a pharmacy loan, you may be required to supply proof of cash flow and have a good credit score. The better your numbers, the more likely you are to be approved.

If you can’t qualify for traditional financing, you may benefit from applying for a U.S. Small Business Administration (SBA) loan.

Unlike conventional loans, SBA loans offer a guarantee on part of the loan. In addition, SBA loans require much less capital for a down payment. Typically, it’s around 10 percent instead of 25 percent for conventional loans.

How to Use the Funds:

Pharmacy business loans are commonly used to finance acquisitions. However, you don’t need to purchase a new business to apply for or benefit from a pharmacy loan.

Here are some other ways a loan can help you expand or make your pharmacy more profitable:

  • Hire Employees: If you’re currently managing your pharmacy business and serving as its main employee, you might want to consider hiring additional pharmacists to take some of the day-to-day tasks off your plate. A small business loan can help you expand your payroll so you can focus your efforts on more strategic business initiatives.
  • Open a New Location: If business is booming, you should consider opening another location to serve more customers. As the industry becomes saturated, a pharmacy loan can help ensure you’re able to stay afloat.
  • Invest in New Technology: In any medical business, investing in the newest technology is key to remaining competitive and providing the best possible service and care to your customers. A loan can help you upgrade your equipment and systems if you haven’t done so recently.
  • Remodel: You can also use an influx of cash to remodel your store. If you haven’t had a chance to do this since you purchased your pharmacy, a more modern update might help you attract new — or younger — customers to your store.

Conclusion: Consider a Small Business Loan to Purchase or Expand Your Pharmacy

Whether you already own a pharmacy or are considering opening one, a pharmacy business loan can help you succeed. Of course, as with any business loan, you’ll need to make sure your personal and business finances are strong. If you’re unsure whether you’ll qualify, you should organize your business plan and financial records to set yourself up for success.

Has your pharmacy received additional financing? Tell us about how you used it in the comment section below!

Fora Financial

Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author's alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.

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Fora Financial is a working capital provider to small business owners nationwide. In addition, the Fora Financial team provides educational information to the small business community through their blog, which covers topics such as business financing, marketing, technology, and much more. If you’d like to see a topic covered on the Fora Financial blog, or want to submit a guest post, please email us at [email protected].